PREM14A 1 d107981dprem14a.htm PREM 14A PREM 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

 

Filed by the Registrant  x                              Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

x   Preliminary Proxy Statement
¨   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
¨   Definitive Proxy Statement
¨   Definitive Additional Materials
¨   Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-2

VIVINT SOLAR, INC.

(Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (Check the appropriate box):

¨   No fee required.
x   Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

Vivint Solar, Inc. common stock, par value $0.01 per share

  (2)  

Aggregate number of securities to which transaction applies:

 

116,763,387 shares of common stock (including 10,187,237 shares of common stock underlying outstanding employee stock options and restricted stock units).

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

 

In accordance with Exchange Act Rule 0-11(c), the filing fee of $113,959.37 was determined by multiplying 0.0001007 by the aggregate merger consideration of $1,131,672,032.96. Solely for the purposes of calculating the filing fee, the aggregate merger consideration was calculated based upon on the product of: (i) 116,763,387 shares of Common Stock (including 10,187,237 shares of common stock underlying outstanding employee stock options and restricted stock units) and (ii) $9.80, the average of the high and low prices of Vivint Solar common stock as reported by the New York Stock Exchange on December 15, 2015, less $12,609,159.64 (the net proceeds applicable to the exercise of the stock options, calculated by multiplying (i) 9,276,629, the number of outstanding stock options by (ii) $1.3592394, the weighted average exercise price).

  (4)  

Proposed maximum aggregate value of transaction:

 

$1,131,672,032.96

  (5)  

Total fee paid:

 

$113,959.37

¨   Fee paid previously with preliminary materials.
¨   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


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LOGO

VIVINT SOLAR, INC.

3301 N. Thanksgiving Way, Suite 500

Lehi, Utah 84043

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

                    , 2016

Dear Vivint Solar, Inc. Stockholders:

The board of directors of Vivint Solar, Inc. (“Vivint Solar”) has unanimously adopted and approved an Agreement and Plan of Merger, dated as of July 20, 2015, as amended by the Amendment to the Agreement and Plan of Merger (the “Merger Agreement Amendment”), dated as of December 9, 2015, each by and among SunEdison, Inc., a Delaware corporation (“SunEdison”), SEV Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of SunEdison (“Merger Sub”), and Vivint Solar (together with the Merger Agreement Amendment and as it may be further amended from time to time, the “Merger Agreement”), pursuant to which Merger Sub will merge with and into Vivint Solar, with Vivint Solar continuing as the surviving entity (the “Merger”). We are sending you the accompanying proxy statement to notify you of the special meeting of Vivint Solar stockholders being held to vote on the adoption of the Merger Agreement and related matters (the “Special Meeting of Stockholders”) and to ask you to vote at the Special Meeting of Stockholders in favor of the adoption of the Merger Agreement.

This proxy statement is dated                     , 2016 and is first being mailed to Vivint Solar stockholders on or about                     , 2016.

Pursuant to the terms of the Merger Agreement and the notice delivered by Vivint Solar to SunEdison on December 13, 2015 (the “Notice”), pursuant to which Notice Vivint Solar exercised its option to elect that the holders of the Vivint Solar common stock other than our controlling stockholder 313 Acquisition LLC (the “Public Stockholders”) receive merger consideration consisting of all cash, with 313 Acquisition LLC receiving a reduced amount of cash and all of the common stock and convertible notes otherwise issuable as merger consideration, Vivint Solar Stockholders will receive, at the effective time of the Merger (the “Effective Time”), the following:

(a) each share of Vivint Solar common stock issued and outstanding immediately prior thereto held by the Public Stockholders (such shares, excluding shares directly owned by Vivint Solar, SunEdison or Merger Sub, or any of Vivint Solar’s or SunEdison’s respective wholly-owned subsidiaries, or shares with respect to which appraisal rights are properly exercised under Delaware law, the “Public Shares”) will be converted into and will thereafter represent the right to receive:

(i) cash in the amount of $7.89 (the “Base Cash Consideration”);

(ii) an additional amount of cash consideration representing the fair market value of $3.30 in principal amount of 4-year convertible notes (the “Convertible Notes”) issued by SunEdison pursuant to an indenture to be entered into concurrently with the consummation of the Merger and convertible into SunEdison common stock (such principal amount of Convertible Notes, the “Note Consideration”);

(ii) an additional amount in cash consideration representing the fair market value of a number of shares of SunEdison common stock equal to the quotient determined by dividing $3.31 by the Signing Measurement Price (as defined below), and rounding the result to the nearest 1/100,000 of a share (such number of shares of SunEdison common stock, the “Signing Stock Consideration”); and

(iii) an additional amount in cash consideration (which will equal $0.75) representing the fair market value of a number of shares of SunEdison common stock equal to the quotient determined by dividing $0.75 by the Closing FMV (as defined below) and rounding the result to the nearest 1/100,000 of a share (such number of shares of SunEdison common stock, the “Additional Stock Consideration” and, together with the Signing Stock Consideration, the “Stock Consideration”);

 

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the total amounts payable to each Public Share representing the fair market value of the Signing Stock Consideration, (the fair market value of which is based on the “Closing FMV” of such Signing Stock Consideration, as described below) the Additional Stock Consideration (the fair market value of which will equal $0.75) and the Note Consideration (the fair market value of which will be determined based on the formula described below) being referred to herein as the “Additional Cash Consideration” and together with the Base Cash Consideration payable in respect of the Public Shares, the “Public Cash Consideration”; and

(b) each share of Vivint Solar common stock that is owned by 313 Acquisition LLC (“313”) (such shares, the “313 Shares,” and together with the Public Shares, the “Participating Shares”) will be converted into and will thereafter represent the right to receive:

(i) the Base Cash Consideration less an amount in cash equal to the aggregate Additional Cash Consideration divided by the number of outstanding 313 Shares;

(ii) the Note Consideration multiplied by the total number of Participating Shares, allocated equally among such 313 Shares; and

(iv) the Stock Consideration multiplied by the total number of Participating Shares, allocated equally among such 313 Shares;

the total amounts payable to each 313 Share pursuant to clauses (b)(i) through (iii) being referred to herein as the “313 Merger Consideration”.

A copy of the Notice was filed by Vivint Solar with the SEC on Form 8-K. Accordingly, the “Merger Consideration” (as such term is used in the accompanying proxy statement) shall mean the Public Cash Consideration and the 313 Merger Consideration collectively.

As used herein, the “Signing Measurement Price” represents the volume weighted average price per share of SunEdison common stock (rounded down to the nearest cent) on the New York Stock Exchange (the “NYSE”) for the 30 consecutive trading days ending on (and including) the third trading day immediately prior to the Effective Time; provided that the calculation is subject to a “collar” which provides that if the Signing Measurement Price is less than $27.51, the Signing Stock Consideration will be equal to 0.120 shares of SunEdison common stock, and if the Signing Measurement Price is more than $33.62, the Signing Stock Consideration will be 0.098 shares of SunEdison common stock. Based on the trading price of SunEdison’s common stock as of December 18, 2015, and the collar, the Signing Stock Consideration would be equal to 0.120 shares of SunEdison common stock.

As used herein, the “Closing FMV” represents the volume weighted average price per share of SunEdison common stock (rounded down to the nearest cent) on the NYSE for the five (5) consecutive trading days ending on (and including) the second trading day immediately prior to the Effective Time.

As set forth in the Notice, for purposes of calculating the Additional Cash Consideration, (i) the fair market value of the Signing Stock Consideration and the Additional Stock Consideration will be based on the Closing FMV and (ii) the fair market value of the Note Consideration will be determined by calculating the present value of the Convertible Notes, using a discount value equal to the average internal rate of return of each series of convertible notes of SunEdison outstanding as of December 13, 2015, based on the volume weighted average price of each series of such notes (rounded down to the nearest cent) as reported by Bloomberg Financial Markets for the five consecutive trading days ending on (and including) the second trading day immediately prior to the Effective Time.

In the event the number of shares of SunEdison common stock that would otherwise constitute the Stock Consideration payable to 313 would require SunEdison to seek approval from its stockholders pursuant to the rules and regulations of the NYSE or other securities laws, rules and regulations, the amount of Stock Consideration will be reduced such that the total amount of the Stock Consideration would equal the maximum

 

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number of shares of SunEdison common stock that could be issued without such stockholder approval being required and the amount of cash consideration payable to 313 shall be increased commensurately. See the section entitled “The Merger Agreement—The Merger Consideration” beginning on page 131 of the accompanying proxy statement.

Based on the five day volume weighted average trading price of $5.85 of SunEdison common stock on the NYSE for the five consecutive trading days ended on December 18, 2015, the fair market value of the Signing Stock Consideration would be $0.70 and the fair market value of the Additional Stock Consideration would be $0.75, in each case per share of Vivint Solar common stock. As of the close of business on such date, the fair market value of the Note Consideration would be $1.77 based on the formula described above. Accordingly, the total value of the Merger Consideration would have represented approximately $11.11 per share of Vivint Solar common stock as of such date. However, the value of the Merger Consideration will fluctuate with the market price of SunEdison common stock and will not be known at the time the Vivint Solar stockholders vote on the Merger at the Special Meeting of Stockholders. SunEdison common stock is listed on the NYSE under the trading symbol “SUNE,” and we encourage you to obtain quotes for the SunEdison common stock.

We cannot complete the Merger without the approval of holders of a majority of the outstanding shares of Vivint Solar common stock entitled to vote at the Special Meeting of Stockholders. A failure to vote on the proposal to adopt the Merger Agreement has the same effect as a vote by you AGAINST the adoption of the Merger Agreement. Therefore, your vote is very important, regardless of the number of shares of common stock you own, and we urge you to take the time to vote by following the instructions on your proxy card regardless of whether you plan to attend the Special Meeting of Stockholders.

313, which owns approximately 77% of the outstanding shares of Vivint Solar common stock entitled to be cast at the Special Meeting of Stockholders, entered into a voting agreement with SunEdison concurrently with the execution of the Merger Agreement, as amended and restated concurrently with the execution of the Merger Agreement Amendment, that obligates it to vote in favor of the proposal to adopt the Merger Agreement in the event the Special Meeting of Stockholders is held, subject to certain exceptions and limitations described in the accompanying proxy statement under “The Merger—Agreements Related to the Merger—Voting Agreement.” As such, Vivint Solar expects to be able to obtain the required vote or written consent of stockholders necessary to approve the Merger.

Vivint Solar’s board of directors has unanimously approved the Merger Agreement, the Merger and all of the other transactions contemplated by the Merger Agreement, declared that it is in the best interests of Vivint Solar and its stockholders to enter into the Merger Agreement and to consummate the Merger and all of the other transactions contemplated by the Merger Agreement, directed that the adoption of the Merger Agreement be submitted to a vote at the Special Meeting of Stockholders, and recommended that the Vivint Solar stockholders vote to adopt the Merger Agreement. ACCORDINGLY, VIVINT SOLAR’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT VIVINT SOLAR STOCKHOLDERS VOTE “FOR” THE PROPOSAL TO ADOPT THE MERGER AGREEMENT. In considering the recommendations of Vivint Solar’s board of directors, you should be aware that certain directors and executive officers of Vivint Solar will have interests in the Merger that may be different from, or in addition to, the interests of Vivint Solar stockholders generally. See the section entitled “The Merger—Interests of Vivint Solar’s Directors and Executive Officers in the Merger” beginning on page 119 of the accompanying proxy statement.

 

 

We urge you to read the proxy statement and the Annexes and the documents incorporated by reference carefully and in their entirety. If you have any questions regarding this proxy statement, you may contact Robert Kain, Vivint Solar’s Vice President, Investor Relations, toll-free at (877) 404-4129.

 

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On behalf of Vivint Solar’s board of directors, thank you for your consideration and continued support. We look forward to the successful completion of the Merger.

Sincerely,

Gregory S. Butterfield

President and Chief Executive Officer

Vivint Solar, Inc.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this proxy statement or determined if this proxy statement is truthful or complete. Any representation to the contrary is a criminal offense.

 

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LOGO

VIVINT SOLAR, INC.

3301 N. Thanksgiving Way, Suite 500

Lehi, Utah 84043

VIVINT SOLAR, INC.

3301 N. THANKSGIVING WAY, SUITE 500

LEHI, UTAH 84043

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON

                    , 2016

NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Vivint Solar, Inc. (“Vivint Solar”), will be held at              , local time, on              ,              , 2016, at 3301 N. Thanksgiving Way, Suite 500, Lehi, Utah 84043 (the “Special Meeting of Stockholders”). Holders of Vivint Solar common stock at the close of business on              (such date and time, the “Record Date”) will be asked to:

Proposal 1. Consider and vote upon the adoption of the Agreement and Plan of Merger, dated as of July 20, 2015, as amended by the Amendment to the Agreement and Plan of Merger, dated as of December 9, 2015 (as it may be further amended from time to time, the “Merger Agreement”), by and among SunEdison, Inc., SEV Merger Sub Inc. and Vivint Solar; and

Proposal 2. Consider and vote upon the approval of the adjournment of the Special Meeting of Stockholders, if necessary, to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement at the time of the Special Meeting of Stockholders.

Please refer to the attached proxy statement and the Merger Agreement for further information with respect to the business to be transacted at the Special Meeting of Stockholders. Vivint Solar does not expect to transact any other business at the meeting. Only holders of record of Vivint Solar common stock as of the Record Date will be entitled to notice of and to vote at the Special Meeting of Stockholders with regard to Proposals 1 and 2 described above.

Vivint Solar’s board of directors unanimously resolved to recommend that you vote “FOR” the adoption of the Merger Agreement and “FOR” the approval of the adjournment of the Special Meeting of Stockholders, if necessary, to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement at the time of the Special Meeting of Stockholders.

Your vote is important regardless of the number of shares that you own. Whether or not you plan on attending the Special Meeting of Stockholders, we urge you to read the proxy statement carefully and to please vote your shares as promptly as possible. You may vote your shares by proxy electronically via the Internet, by telephone, by completing and sending in the appropriate paper proxy card or in person at the Special Meeting of Stockholders.

All Vivint Solar stockholders as of the Record Date are cordially invited to attend the Special Meeting of Stockholders.

By order of the Board of Directors,

Shawn J. Lindquist

Chief Legal Officer, Executive Vice President

and Secretary

                     , 2016

Lehi, Utah

 

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THIS PROXY STATEMENT INCORPORATES ADDITIONAL INFORMATION

This proxy statement incorporates by reference important business and financial information about Vivint Solar and SunEdison from documents that are not included in or delivered with this proxy statement. This information is available to you without charge upon request. For a more detailed description of the information incorporated by reference into this proxy statement and how you may obtain it, see the section entitled “Additional Information” beginning on page 199.

You can obtain any of the documents that are incorporated by reference into this proxy statement from the SEC through the SEC’s website at www.sec.gov. Documents that are incorporated by reference are also available from Vivint Solar or SunEdison, as applicable, without charge, excluding any exhibits to those documents that are not specifically incorporated by reference as exhibits in this proxy statement. Vivint Solar stockholders may request a copy of the documents that are incorporated by reference in writing or by telephone by contacting:

For information about Vivint Solar:

Vivint Solar, Inc.

3301 N. Thanksgiving Way, Suite 500

Lehi, Utah 84043

Telephone number: (877) 404-4129

Attn: Investor Relations

For information about SunEdison:

SunEdison, Inc.

13736 Riverport Drive

Maryland Heights, Missouri 63043

Telephone number: (314) 770-7300

Attn: Director of Investor Relations

In addition, if you have any questions about the Special Meeting of Stockholders, the Merger or this proxy statement or need additional copies of this proxy statement or need to obtain proxy cards or any other information relating to the proxy solicitation, please send your request in writing or by telephone to the following address or telephone number:

Vivint Solar, Inc.

3301 N. Thanksgiving Way, Suite 500

Lehi, Utah 84043

Telephone number: (877) 404-4129

Attn: Investor Relations

In order for you to receive timely delivery of the documents in advance of the Special Meeting of Stockholders, Vivint Solar or SunEdison, as applicable, should receive your request no later than five business days before the Special Meeting, which is                     , 2016.

Investors may also consult Vivint Solar’s or SunEdison’s respective websites for more information concerning the Merger. Vivint Solar’s website is www.vivintsolar.com. SunEdison’s website is www.sunedison.com. Information included on Vivint Solar’s website and/or on SunEdison’s website is not incorporated by reference into and should not be deemed a part of this proxy statement.

 

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PROXY STATEMENT

FOR SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON                     , 2016

TABLE OF CONTENTS

 

     Page  

SUMMARY TERM SHEET

     1   

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING OF STOCKHOLDERS

     18   

Questions About the Merger

     18   

Questions About the Special Meeting of Stockholders

     29   

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

     34   

THE VIVINT SOLAR SPECIAL MEETING OF STOCKHOLDERS

     36   

Proxy statement

     36   

Date, Time and Place of the Special Meeting of Stockholders

     36   

Purpose of the Special Meeting of Stockholders

     36   

Record Date and Voting

     36   

Vote Required

     36   

Recommendation of Vivint Solar’s Board of Directors

     37   

Voting Electronically or by Telephone

     37   

Vote of Vivint Solar’s Executive Officers

     38   

Revocability of Proxies

     38   

Inspector of Election

     38   

Attending the Special Meeting of Stockholders

     38   

Voting Procedures

     39   

Proxy Solicitations

     39   

Householding

     39   

PROPOSAL 1: THE MERGER

     40   

THE MERGER

     41   

General

     41   

Background of the Merger

     41   

Financing

     71   

Agreements Related to the Merger

     73   

Voting Agreement

     73   

Management Services Agreement

     73   

Registration Rights Agreement

     74   

Letter Agreement Regarding Intercompany Agreements

     74   

Recommendation of Vivint Solar’s Board of Directors; Reasons for Vivint Solar’s Board of Directors’ Recommendation

     75   

Opinion of Vivint Solar’s Financial Advisors

     81   

Opinion of Morgan Stanley

     81   

Opinion of Duff & Phelps

     96   

 

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     Page  

Certain Vivint Solar Forecasted Financial Information

     103   

General Information Regarding Forecasts

     103   

Important Information about the Forecasts

     104   

Certain Unaudited Financial Information Reviewed by Vivint Solar’s Board of Directors and Vivint Solar’s Financial Advisor

     105   

Regulatory Approvals Required for the Merger

     109   

Material U.S. Federal Income Tax Consequences of the Merger

     110   

Exchange of Merger Consideration for Vivint Solar Common Stock

     111   

Consequences of Holding SunEdison Common Stock

     112   

Consequences of Holding Convertible Notes

     112   

Information Reporting and Backup Withholding

     114   

Accounting Treatment

     114   

Delisting of Vivint Solar Common Stock and Issuance of Convertible Notes

     114   

Appraisal Rights of Dissenting Vivint Solar Stockholders

     115   

Restrictions on Sales of Shares of SunEdison Common Stock Received by Affiliates in the Merger

     119   

Interests of Vivint Solar’s Directors and Executive Officers in the Merger

     119   

Treatment of Equity Awards Held by Executive Officers and Directors

     119   

Payments to Vivint Solar Executive Officers Contingent Upon or Following the Merger

     121   

Treatment of Vivint Solar Equity Awards

     125   

Vested Options

     125   

Vested RSUs

     125   

Unvested Options and RSUs

     125   

LTIP Awards

     126   

SunEdison Compensation Plans and Certain Equity Awards

     126   

Board of Directors and Management of SunEdison After the Merger

     126   

Exchange of Shares

     126   

Litigation Related to the Merger

     127   

Other Litigation

     128   

Class Action Regarding TerraForm Global IPO

     128   

Other Securities Litigation

     129   

THE MERGER AGREEMENT

     130   

Structure of the Merger

     130   

Closing and Effective Time of the Merger

     130   

Post-Merger Governing Documents, Directors and Officers, Corporate Name and Headquarters

     130   

SunEdison Governing Documents

     130   

Vivint Solar Governing Documents

     130   

Vivint Solar Board of Directors and Officers

     130   

The Merger Consideration

     131   

Conversion of Vivint Solar Common Stock

     131   

Exchange Procedures

     134   

Vivint Solar Stock Options and Other Stock Awards

     135   

 

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Withholding Rights

     136   

Representations and Warranties

     136   

Conduct of Business Pending the Merger

     138   

Takeover Proposals

     141   

Special Meeting of Stockholders

     144   

Publicity

     144   

Employee Matters

     144   

Conditions to the Merger

     146   

Conditions to Each Party’s Obligations to Effect the Merger

     146   

Conditions to Obligations of SunEdison and Merger Sub

     146   

Conditions to Obligations of Vivint Solar

     147   

Termination of the Merger Agreement

     147   

Effect of Termination

     149   

Termination Fees and Expenses

     150   

Amendment and Waiver

     151   

SEC Filings

     151   

Reasonable Best Efforts and Regulatory Matters

     151   

Fees and Expenses

     152   

Indemnification; Directors’ and Officers’ Insurance

     152   

Specific Performance

     153   

DESCRIPTION OF CAPITAL STOCK OF SUNEDISON

     154   

Authorized Capital Stock

     154   

Preferred Stock

     154   

General

     154   

Perpetual Convertible Preferred Stock

     154   

Common Stock

     158   

Delaware Anti-Takeover Law; No Super-Majority Approval

     159   

DESCRIPTION OF CONVERTIBLE NOTES

     160   

Ranking

     160   

Principal and Interest

     160   

Conversion RIght

     160   

Conversion Procedures

     161   

Conversion Rate; Adjustments

     162   

Repurchase Upon a Fundamental Change

     163   

Conversion in Connection With a Make-Whole Fundamental Change

     163   

Consolidation, Merger and Sale of Assets

     164   

Events of Default; Notice and Waiver

     164   

Modification and Amendment

     166   

Information Concerning the Trustee

     167   

Rights of Holders of Convertible Notes

     167   

 

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     Page  

COMPARISON OF STOCKHOLDER RIGHTS AND CORPORATE GOVERNANCE MATTERS

     168   

PROPOSAL 2: ADJOURNMENT IF VOTES ARE INSUFFICIENT TO ADOPT MERGER AGREEMENT

     193   

MARKET PRICE OF VIVINT SOLAR’S COMMON STOCK

     194   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     195   

MULTIPLE STOCKHOLDERS SHARING ONE ADDRESS

     197   

FUTURE STOCKHOLDER PROPOSALS

     198   

ADDITIONAL INFORMATION

     199   

Annexes

  

Annex A

   Agreement and Plan of Merger

Annex B

   Amendment to the Agreement and Plan of Merger

Annex C

   Amended and Restated Certificate of Incorporation of SunEdison

Annex D

   Amended and Restated By-laws of SunEdison

Annex E

   Amended and Restated Purchase Agreement

Annex F

   Amended and Restated Voting Agreement

Annex G

   Registration Rights Agreement

Annex H

   Management Services Agreement

Annex I

   Form of Convertible Notes Indenture

Annex J

   Opinion of Morgan Stanley to Vivint Solar, dated July 20, 2015

Annex K

   Opinion of Morgan Stanley to Vivint Solar, dated December 9, 2015

Annex L

   Opinion of Morgan Stanley to Vivint Solar, dated December 11, 2015

Annex M

   Opinion of Duff & Phelps LLC to Vivint Solar, dated December 11, 2015

Annex N

   Copy of Section 262 of the Delaware General Corporation Law

 

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SUMMARY TERM SHEET

The following is a summary that highlights information contained in this proxy statement. This summary may not contain all of the information that may be important to you. For a more complete description of the Merger Agreement and the Merger (each as defined below), Vivint Solar, Inc. (“Vivint Solar”) encourages you to read carefully this entire proxy statement, including the attached Annexes. In addition, Vivint Solar encourages you to read the documents incorporated by reference into this proxy statement, which have been filed with the U.S. Securities and Exchange Commission (the “SEC”). These documents include important business and financial information about SunEdison and Vivint Solar. You may obtain the information incorporated by reference into this proxy statement without charge by following the instructions in the section entitled “Additional Information” beginning on page 199. As used in this proxy statement, the “combined company” refers to SunEdison and its subsidiaries following the completion of the Merger and the “surviving corporation” refers to Vivint Solar following the completion of the Merger.

The Companies

Vivint Solar, Inc.

Vivint Solar, Inc., a Delaware corporation, is a provider of distributed solar energy—electricity generated by a solar energy system installed at or near a customer’s location—to residential customers based on 20-year contracts at prices below their utility rates. Vivint Solar’s customers pay little to no money upfront, and typically save 20% to 40% on solar-generated electricity rates relative to utility-generated electricity rates following system interconnection to the power grid and continue to benefit from locked-in energy prices over the term of their contracts, insulating them against unpredictable increases in utility rates.

Vivint Solar’s principal executive offices are located at 3301 N. Thanksgiving Way, Suite 500, Lehi, Utah 84043. Vivint Solar’s telephone number is (877) 404-4129, and its Internet address is www.vivintsolar.com. Information contained on Vivint Solar’s website is not incorporated by reference into and should not be deemed a part of this proxy statement or any filing filed with or furnished to the SEC.

Vivint Solar common stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol “VSLR.”

SunEdison, Inc.

SunEdison, Inc., a Delaware corporation, is the largest global renewable energy development company and is transforming the way energy is generated, distributed and owned around the world. SunEdison develops, finances, installs, owns and operates renewable power plants, delivering predictably priced electricity to its residential, commercial, government and utility customers. SunEdison is also one of the world’s largest renewable energy asset managers and provides customers with asset management, operations and maintenance, monitoring and reporting services. In addition, Sun Edison manufactures advanced renewable energy materials and technologies. SunEdison’s corporate headquarters are located in the United States with additional offices and technology manufacturing around the world.

SunEdison’s principal executive offices are located at 13736 Riverport Dr., Maryland Heights, Missouri 63043. SunEdison’s telephone number is (314) 770-7300, and its Internet address is www.sunedison.com. Information contained on SunEdison’s website is not incorporated by reference into and should not be deemed a part of this proxy statement or any filing filed with or furnished to the SEC.

SunEdison common stock is listed on the NYSE under the symbol “SUNE.”

 



 

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SEV Merger Sub Inc.

SEV Merger Sub Inc., a Delaware corporation (“Merger Sub”), is a wholly owned subsidiary of SunEdison that was formed on July 15, 2015 for the sole purpose of effecting the Merger and will not engage in any business activities other than those relating to the transactions contemplated by the Merger Agreement.

The Merger (see page 41)

Structure of the Merger

SunEdison’s and Vivint Solar’s boards of directors have each approved the Agreement and Plan of Merger, dated as of July 20, 2015, as amended by the Amendment to the Agreement and Plan of Merger (the “Merger Agreement Amendment”), dated as of December 9, 2015 (as it may be further amended from time to time, the “Merger Agreement”), each by and among SunEdison, Merger Sub and Vivint Solar, pursuant to which Merger Sub will merge with and into Vivint Solar, with Vivint Solar surviving as a wholly owned subsidiary of SunEdison (the “Merger”). At the Special Meeting of Stockholders (as defined below), you will be asked to consider and vote upon a proposal to adopt the Merger Agreement.

The effect of the Merger will be that Vivint Solar will be acquired by SunEdison and shares of Vivint Solar common stock will no longer be publicly traded.

Merger Consideration

Pursuant to the terms of the Merger Agreement and the notice delivered by Vivint Solar to SunEdison on December 13, 2015 (the “Notice”), pursuant to which Notice Vivint Solar exercised its option to elect that the holders of the Vivint Solar common stock other than our controlling stockholder 313 Acquisition LLC (the “Public Stockholders”) receive merger consideration consisting of all cash, with 313 Acquisition LLC receiving a reduced amount of cash and all of the common stock and convertible notes otherwise issuable as merger consideration, Vivint Stockholders will receive at the effective time of the Merger (the “Effective Time”) the following:

(a) each share of Vivint Solar common stock issued and outstanding immediately prior thereto held by the Public Stockholders (such shares, excluding shares directly owned by Vivint Solar, SunEdison or Merger Sub, or any of Vivint Solar’s or SunEdison’s respective wholly-owned subsidiaries, or shares with respect to which appraisal rights are properly exercised under Delaware law, the “Public Shares”) will be converted into and will thereafter represent the right to receive:

(i) cash in the amount of $7.89 (the “Base Cash Consideration”);

(ii) an additional amount of cash consideration representing the fair market value of $3.30 in principal amount of 4-year convertible notes (the “Convertible Notes”) issued by SunEdison pursuant to an indenture to be entered into concurrently with the consummation of the Merger and convertible into SunEdison common stock (such principal amount of Convertible Notes, the “Note Consideration”);

(iii) an additional amount in cash consideration representing the fair market value of a number of shares of SunEdison common stock equal to the quotient determined by dividing $3.31 by the Signing Measurement Price (as defined below), and rounding the result to the nearest 1/100,000 of a share (such number of shares of SunEdison common stock, the “Signing Stock Consideration”); and

(iv) an additional amount in cash consideration (which will equal $0.75) representing the fair market value of a number of shares of SunEdison common stock equal to the quotient determined by dividing $0.75 by the Closing FMV (as defined below) and rounding the result to the nearest 1/100,000 of a share (such number of shares of SunEdison common stock, the “Additional Stock Consideration” and, together with the Signing Stock Consideration, the “Stock Consideration”);

 



 

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the total amounts payable to each Public Share representing the fair market value of the Signing Stock Consideration (the fair market value of which is based on the “Closing FMV” of such Signing Stock Consideration, as described below), the Additional Stock Consideration (the fair market value of which will equal $0.75) and the Note Consideration (the fair market value of which will be determined based on the formula described below) being referred to herein as the “Additional Cash Consideration” and together with the Base Cash Consideration payable in respect of the Public Shares, the “Public Cash Consideration”; and

(b) each share of Vivint Solar common stock that is owned by 313 Acquisition LLC (“313”) (such shares, the “313 Shares,” and together with the Public Shares, the “Participating Shares”) will be converted into and will thereafter represent the right to receive:

(i) the Base Cash Consideration less an amount in cash equal to the aggregate Additional Cash Consideration divided by the number of outstanding 313 Shares;

(ii) the Note Consideration multiplied by the total number of Participating Shares, allocated equally among such 313 Shares; and

(iii) the Stock Consideration multiplied by the total number of Participating Shares, allocated equally among such 313 Shares;

the total amounts payable to each 313 Share pursuant to clauses (b)(i) through (iii) being referred to herein as the “313 Merger Consideration”.

A copy of the Notice was filed by Vivint Solar with the SEC on Form 8-K. Accordingly, the “Merger Consideration” (as such term is used in this proxy statement) shall mean the Public Cash Consideration and the 313 Merger Consideration collectively.

As used herein, the “Signing Measurement Price” represents the volume weighted average price per share of SunEdison common stock (rounded down to the nearest cent) on the New York Stock Exchange (the “NYSE”) for the 30 consecutive trading days ending on (and including) the third trading day immediately prior to the Effective Time; provided that the calculation is subject to a “collar” which provides that if the Signing Measurement Price is less than $27.51, the Signing Stock Consideration will be equal to 0.120 shares of SunEdison common stock, and if the Signing Measurement Price is more than $33.62, the Signing Stock Consideration will be 0.098 shares of SunEdison common stock. Based on the trading price of SunEdison’s common stock as of December 18, 2015, and the collar, the Signing Stock Consideration would be equal to 0.120 shares of SunEdison common stock.

As used in this proxy statement, the “Closing FMV” represents the volume weighted average price per share of SunEdison common stock (rounded down to the nearest cent) on the NYSE for the five (5) consecutive trading days ending on (and including) the second trading day immediately prior to the Effective Time.

As determined in accordance with the Notice, the fair market value of the per share Merger Consideration to be paid in exchange for the Public Shares is equal to an amount in cash that is equal to the sum of the following:

(i) The Base Cash Consideration, which is valued at $7.89.

(ii) The fair market value of the Note Consideration. Pursuant to the Merger Agreement, the principal amount of Convertible Notes constituting the Note Consideration per share is equal to $3.30. Pursuant to the Notice, the fair market value of the principal amount of the aggregate Note Consideration payable to the holders of all Participating Shares will be determined by calculating the net present value (giving effect to all leap years) of cash amounts payable to holders of such Convertible Notes over time pursuant to the indenture governing the Convertible Notes, discounted by the average internal rate of return of each series of convertible notes of

 



 

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SunEdison outstanding as of December 13, 2015 (collectively, the “Reference Convertible Notes”). The internal rate of return for each series of the Reference Convertible Notes will be calculated based on the volume weighted average price of each series of Reference Convertible Notes (rounded down to the nearest cent) as reported by Bloomberg Financial Markets for the five consecutive trading days ending on (and including) the second trading day immediately prior to the Effective Time. The fair market value of the principal amount of the aggregate Note Consideration payable to the holders of all Participating Shares divided by the principal amount of such aggregate Note Consideration will result in a percentage (the “Note Percentage”) that establishes the fair market value of the Note Consideration relative to the principal amount of Convertible Notes that constitutes the Note Consideration. As such, the fair market value of the Note Consideration shall equal $3.30 multiplied by the Note Percentage.

(iii) The fair market value of the Signing Stock Consideration. Pursuant to the Merger Agreement, the number of shares of SunEdison common stock constituting Signing Stock Consideration will be determined based on the Signing Measurement Price; subject to the collar. Based on the trading price of the SunEdison common stock as of December 18, 2015 and the collar, the Signing Stock Consideration would be 0.120 shares of SunEdison common stock. Pursuant to the Notice, the fair market value of such SunEdison common stock will be equal to the product of the number of shares of SunEdison common stock to be paid as Signing Stock Consideration multiplied by the Closing FMV.

(iv) The fair market value of the Additional Stock Consideration. Pursuant to the Merger Agreement, the number of shares of SunEdison common stock constituting Additional Stock Consideration will be determined as the number of shares that, based on the Closing FMV, have a value equal to $0.75. Because the Notice provides that the fair market value of the Additional Stock Consideration is to be based on the Closing FMV, the fair market value of the Additional Stock Consideration will equal $0.75.

Pursuant to the Notice, the amount of Additional Cash Consideration payable per share of Vivint Solar common stock is equal to the sum of the cash amounts as determined in clauses (ii), (iii) and (iv) above.

The fair market value of the per share Merger Consideration payable in exchange for the 313 Shares is equal to the fair market value of the aggregate 313 Merger Consideration divided by the number of outstanding 313 Shares. The fair market value of the aggregate amount payable to 313 is equal to the sum of:

(i) Aggregate Cash. The total Cash Consideration payable to 313 less the aggregate Additional Cash Consideration payable in respect of all the Public Shares.

(ii) Aggregate Note Consideration. Pursuant to the Merger Agreement, 313 will receive a principal amount of Convertible Notes equal to $3.30 multiplied by the total number of Participating Shares. The fair market value of such aggregate consideration will be equal to the principal amount of the Convertible Notes payable to all Participating Shares multiplied by the Note Percentage.

(iii) Aggregate Stock Consideration. Pursuant to the Merger Agreement, 313 will receive a number of shares of SunEdison common stock equal to the Stock Consideration multiplied by the total number of Participating Shares. The fair market value of such aggregate consideration will be equal to the total number of shares of SunEdison common stock payable to 313 multiplied by the Closing FMV;

In the event the number of shares of SunEdison common stock that would otherwise constitute the Stock Consideration would require SunEdison to seek approval from its stockholders pursuant to the rules and regulations of the NYSE or other securities laws, rules and regulations, the reference to $0.75 within the definition of Additional Stock Consideration will be reduced such that the total amount of the Stock Consideration would equal the maximum number of shares of SunEdison common stock that could be issued without such stockholder approval being required (the amount by which such reference to $0.75 is so reduced, the “Reduction”), and the amount of Cash Consideration

 



 

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will be increased by the amount of such Reduction. See the section entitled “The Merger Agreement—The Merger Consideration” beginning on page 131 of the accompanying proxy statement.

Based on the five day volume weighted average trading price of $5.85 of SunEdison common stock on the NYSE for the five consecutive trading days ended on December 18, 2015, the fair market value of the Signing Stock Consideration would be $0.70 and the fair market value of the Additional Stock Consideration would be $0.75, in each case per share of Vivint Solar common stock. As of the close of business on such date, the fair market value of the Note Consideration would be $1.77 based on the formula described above. Accordingly, the total value of the Merger Consideration would have represented approximately $11.11 per share of Vivint Solar common stock as of such date. However, the value of the Merger Consideration will fluctuate with the market price of SunEdison common stock and will not be known at the time the Vivint Solar stockholders vote on the Merger at the Special Meeting of Stockholders. SunEdison common stock is listed on the NYSE under the trading symbol “SUNE,” and we encourage you to obtain quotes for the SunEdison common stock.

The Convertible Notes will be issued pursuant to an indenture to be entered into concurrently with the consummation of the Merger by and between SunEdison and Computershare Trust Company, National Association, as trustee (the “Trustee”), in the form attached as Annex I hereto (the “Indenture”). The Convertible Notes will constitute direct unsecured, senior obligations of SunEdison. The initial conversion price for the Convertible Notes will be 140% of the Signing Measurement Price, but the Signing Measurement Price for purposes of this calculation may not exceed $33.62 or be lower than $27.51. The Convertible Notes will bear interest at a rate of 2.25% per year, payable semiannually in arrears in cash. The Convertible Notes will have a maturity date that is four years from issuance. The Convertible Notes will be issuable only in registered form without coupons and in minimum denominations of $100 and any integral multiple of $100. Holders of the Convertible Notes may surrender the Convertible Notes for conversion only under limited circumstances, as described in the Indenture. Upon conversion SunEdison will deliver, at its election, (i) solely cash, (ii) solely shares of SunEdison common stock, or (iii) a combination of cash and shares of SunEdison common stock, with each of clauses (i), (ii) and (iii) to be based on a daily conversion value calculated on a proportionate basis for each trading day of a 25-day observation period. The conversion rate will be subject to adjustment in certain circumstances, as described in the Indenture.

SunEdison will not issue any fractional shares of SunEdison common stock or Convertible Notes with a denomination of less than $100 in the Merger. Holders of Vivint Solar common stock who would otherwise be entitled to a fractional share of SunEdison common stock or Convertible Notes with a denomination of less than $100 will receive cash in lieu thereof.

Pursuant to the Merger Agreement, all outstanding equity securities of Vivint Solar at the time of the Merger will be cancelled. The shares of SunEdison common stock to be issued in connection with the Merger will be newly issued shares. Consequently, neither the trading price of Vivint Solar common stock nor the trading price of SunEdison common stock reflects the price at which SunEdison common stock will trade following the Merger.

Assuming the Merger had been consummated on December 18, 2015, it is expected that the aggregate number of shares of SunEdison common stock issuable in the Merger to 313 (not including any such shares underlying the Convertible Notes) would have represented approximately 7.7% of the outstanding equity ownership of SunEdison (based on the total outstanding shares of SunEdison common stock as of November 2, 2015).

 



 

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Financing

SunEdison and Merger Sub intend to finance the Cash Consideration primarily from the proceeds of the Term Facility and the TERP Acquisition (each as defined below). If SunEdison is unable to obtain any portion of the financing described below and such portion is required to fund any portion of the Cash Consideration and any fees, expenses and other amounts contemplated by the Merger Agreement to be paid by SunEdison, Merger Sub or Vivint Solar as the surviving corporation, including any indebtedness of Vivint Solar that will be due and payable at the closing of the Merger, SunEdison and Merger Sub will be obligated to take any and all actions necessary to obtain alternative financing in an amount sufficient to consummate the Merger and the transactions contemplated by the Merger Agreement, including any indebtedness of Vivint Solar that will be due and payable at the closing of the Merger. Notwithstanding the foregoing, SunEdison’s and Merger Sub’s obligations to consummate the Merger and the other transactions contemplated by the Merger Agreement are not conditioned upon their obtaining financing to pay the Cash Consideration or the consummation of the Term Facility, the TERP Acquisition or receipt of any other third-party financing.

In connection with the Merger Agreement Amendment, SunEdison entered into a second amended and restated debt commitment letter, dated as of December 9, 2015 with Goldman Sachs Bank USA, Barclays Bank PLC, Citigroup Global Markets Inc. and UBS Securities LLC, pursuant to which, among other things, such institutions have committed to provide, subject to the terms and conditions thereof, a $300 million secured term loan facility (the “Term Facility”) to a wholly owned indirect subsidiary of SunEdison (the “Term Borrower”). SunEdison intends to transfer certain development assets of Vivint Solar and of SunEdison’s residential solar business to the Term Borrower on the date of the consummation of the Merger (the “Closing Date”). The Term Facility will be guaranteed by the immediate parent of the Term Borrower (a wholly-owned subsidiary of SunEdison) and all of the Term Borrower’s domestic subsidiaries, and will be secured by substantially all assets of the Term Borrower and such guarantors. The funding of the Term Facility is subject to customary conditions, including the negotiation of definitive documentation and other customary closing conditions.

In addition, on December 9, 2015, in connection with its entry into the Merger Agreement Amendment, SunEdison entered into an Amended and Restated Purchase Agreement (as it may be further amended, the “TERP Purchase Agreement”) with its controlled affiliate, TerraForm Power, LLC (“Terra LLC”), pursuant to which SunEdison has agreed to sell to Terra LLC the equity interests in certain subsidiaries of Vivint Solar (the “Purchased Subsidiaries”) holding assets constituting Vivint Solar’s rooftop solar portfolio (the “TERP Acquisition”), for a purchase price (the “TERP Cash Consideration”) equal to the product of (i) the lesser of (x) the actual installed capacity (in megawatts (“MW”)) of residential solar operating systems owned by the Purchased Subsidiaries on the Closing Date and (y) 523 MW, multiplied by (ii) $1,700,000 to be paid concurrently with the consummation of the Merger. SunEdison expects that the TERP Cash Consideration will be approximately $799 million based on the number of installed megawatts expected to be delivered at closing (currently expected to be approximately 470 MW).

Pursuant to the TERP Purchase Agreement, Terra LLC may, at its option, choose to assume (or have a subsidiary of Terra LLC assume) the obligations under that certain Loan Agreement, dated as of September 12, 2014 (as amended, restated, amended and restated, supplemented or otherwise modified, the “Aggregation Facility”) among Vivint Solar Financing I, LLC, a Delaware limited liability company, Vivint Solar Holdings, Inc., a Delaware corporation, the other guarantors and lenders party thereto from time to time, and Bank of America, N.A., as administrative agent and collateral agent, or any additional or other indebtedness that is secured by direct or indirect interests in the Purchased Subsidiaries and that supplements, refinances or replaces the Aggregation Facility (such additional indebtedness, together with the Aggregation Facility, the “Indebtedness”). To the extent obligations under any Indebtedness are assumed by Terra LLC (or a subsidiary of Terra LLC) on or before the consummation of the TERP Acquisition, then the TERP Cash Consideration will be reduced on a dollar-for-dollar basis by an amount equal to the then outstanding aggregate amount under the

 



 

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assumed Indebtedness. If any Purchased Subsidiary is obligated to repay any such Indebtedness and such Indebtedness remains outstanding as of the consummation of the TERP Acquisition, such Indebtedness will be deemed to have been assumed by Terra LLC. At the consummation of the TERP Acquisition, a portion of the TERP Cash Consideration, estimated to be up to $75,000,000, may be placed into escrow and be unavailable to SunEdison to fund its payment obligations under the Merger Agreement.

The TERP Purchase Agreement is not conditioned on Terra LLC’s receipt of any third-party financing. Terra LLC intends to finance the TERP Acquisition with existing cash, availability under the revolving credit facility of TerraForm Power Operating, LLC (“TerraForm Operating”), a controlled affiliate of SunEdison and controlled subsidiary of TerraForm Power, Inc. (“TerraForm Power”) and the assumption or incurrence of project-level debt. In addition, in connection with the TERP Purchase Agreement, TerraForm Operating has entered into a second amended and restated debt commitment letter, dated as of December 9, 2015, with Goldman Sachs Bank USA, Citigroup Global Markets Inc., Barclays Bank PLC and UBS AG, Stamford Branch (the “Bridge Lenders”), pursuant to which, among other things, the Bridge Lenders have committed to provide, subject to the terms and conditions thereof, borrowings under a $795 million unsecured bridge facility (the “Bridge Financing Commitment”). As of December 9, 2015, the Bridge Financing Commitment was reduced by $236.5 million based upon the principal amount outstanding and aggregate commitments available to be drawn under the Aggregation Facility, which is expected to be assumed by Terra LLC (or its subsidiary). Furthermore, the Bridge Financing Commitment is expected to be reduced by any increase in the commitments available to be drawn and actual borrowings under the Aggregation Facility occurring after December 9, 2015 and on or prior to the Effective Time. In addition, the Bridge Financing Commitment is required to be reduced by the release from escrow of certain project level reserves associated with TERP LLC’s assets in the United Kingdom, which are expected to be approximately $24 million and which were funded using a portion of the net proceeds from the GBP 313.5 million credit facility entered into by a subsidiary of TerraForm Operating on November 6, 2015. The funding of the Bridge Financing Commitment, as it may be reduced from time to time as described in this paragraph and in the associated commitment documents, is subject to the negotiation of definitive documentation and other customary closing conditions.

On December 9, 2015, SunEdison entered into that certain Term Facility, Take/Pay and IDR Letter Agreement (the “TERP Letter Agreement”) with Terra LLC pursuant to which, SunEdison, among other things, agreed to use its reasonable best efforts to sell to third-party purchaser(s): (a) the “cash” or “sponsor” equity position in tax equity partnership or funds for the acquisition of residential solar systems that Terra LLC will be obligated to purchase from the Term Borrower under the take/pay agreement to be entered into between Terra LLC and the Term Borrower (the “Take/Pay Agreement”) and (b) the Purchased Subsidiaries acquired from Vivint Solar that Terra LLC would otherwise be obligated to purchase under the TERP Purchase Agreement, in each case, subject to certain conditions , including that the Merger has been consummated (including that SunEdison has wired to the paying agent under the Merger Agreement the full cash portion of the Merger Consideration and has available cash funds to pay its other obligations in connection with the Merger). If any such third party purchase and sale agreement is for 100 MW or more, then SunEdison will be required to obtain the consent of the Corporate Governance and Conflicts Committee of the Board of Directors of TerraForm Power prior to the entry into any such agreement. If SunEdison, Vivint Solar or any of its subsidiaries enters into an agreement for the sale of any Purchased Subsidiary to a third-party purchaser other than TerraForm Power or any of its subsidiaries between the date of the letter agreement and the consummation of the Merger, upon the consummation of the Merger, Terra LLC will be relieved of its obligations to purchase any such Purchased Subsidiary that Terra LLC did not acquire in connection with the consummation of the Merger. In addition, if the purchase price paid for a Purchased Subsidiary by any such third party purchaser(s) is less than the purchase price that Terra LLC would have otherwise been obligated to pay under the TERP Purchase Agreement, Terra LLC will not have any obligation to pay or reimburse SunEdison for any such shortfall amounts.

 



 

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The TERP Letter Agreement further requires that SunEdison take certain actions to facilitate the repayment of the Term Facility by December 31, 2016 and that on December 31, 2016, SunEdison will repay the Term Facility in an amount equal to the lesser of (a) $25,000,000 and (b) the outstanding amount under the Term Facility as of such date. Furthermore, the TERP Letter Agreement provides that, concurrent with the closing of the Term Facility, SunEdison will make an equity contribution to the Term Borrower such that the Term Borrower will have at least $100 million cash on hand.

Termination of the Merger Agreement (see page 147)

SunEdison and Vivint Solar may mutually agree to terminate the Merger Agreement at any time prior to the Effective Time. Either company may also terminate the Merger Agreement if the Merger is not completed by March 18, 2016 (the “Termination Date”). The parties may also terminate the Merger Agreement in certain additional circumstances. See the section entitled “The Merger Agreement—Termination of the Merger Agreement” beginning on page 147 for a discussion of these and other rights of each of SunEdison and Vivint Solar to terminate the Merger Agreement.

Termination Fees and Expenses (see page 150)

Subject to the specific exceptions discussed in this proxy statement, in the event the Merger Agreement is terminated, Vivint Solar may be required to pay a termination fee of $34 million and reimburse up to $15 million of certain expenses incurred by SunEdison and Merger Sub in connection with the Merger Agreement. Any such expense reimbursement will be credited towards the termination fee described above if required to be paid by Vivint Solar. See the section entitled “The Merger Agreement—Termination Fees and Expenses” beginning on page 150 for a discussion of the circumstances under which Vivint Solar will be required to pay such termination fees or expense reimbursement.

Agreements Related to the Merger (see page 73)

Voting Agreement

Concurrently with the execution of the Merger Agreement Amendment, SunEdison, Merger Sub and 313, the holder of approximately 77% of the voting power of the outstanding shares of Vivint Solar common stock entitled to be cast at the Special Meeting of Stockholders, entered into an amended and restated voting agreement, dated as of December 9, 2015 (as may be further amended, the “Voting Agreement”), pursuant to which 313 has agreed, among other things, either to vote in favor of the adoption of the Merger Agreement or to deliver a written consent, as the holder of a majority of the outstanding shares of Vivint Solar, made pursuant to Section 2.10 of the amended and restated bylaws of Vivint Solar (the “Vivint Solar Bylaws”), approving and adopting the Merger Agreement (as amended by the Merger Agreement Amendment) and the transactions contemplated thereby, including the Merger, which written consent shall be in a form acceptable to SunEdison and Merger Sub (the “Written Consent”). The Voting Agreement will terminate upon the earliest to occur of (i) the Effective Time, (ii) the termination of the Merger Agreement in accordance with its terms, (iii) a Vivint Solar Change of Recommendation (as defined below) with regard to a Vivint Solar takeover proposal or an Intervening Event (each as defined below) that is made during the period beginning immediately following the execution and delivery of the original Voting Agreement on the date of the original Merger Agreement and ending on the date of receipt of the Vivint Solar stockholder approval, (iv) the entry without the prior written consent of 313 into an amendment, waiver or modification of the Merger Agreement which would decrease the amount or change the form of the Merger Consideration or that otherwise adversely affects 313 or (v) March 18, 2016.

Management Services Agreement

In connection with the execution of the Merger Agreement, on October 19, 2015, SunEdison and Vivint Solar entered into a management services agreement (the “Management Services Agreement”), pursuant to

 



 

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which SunEdison has agreed to provide corporate management, pricing and other advisory services relating to Vivint Solar’s sale and marketing of Vivint Solar’s solar renewable energy credits (“SRECs”) in the forward market in exchange for the right, pursuant to the terms of the Management Services Agreement and until the termination of such agreement, to designate the counterparties to whom Vivint Solar should direct its SREC marketing and sales activities in the forward market. The Management Services Agreement will terminate upon the earliest to occur of the following: (a) either Vivint Solar or SunEdison provides 60 days’ prior written notice to the other party that it desires to terminate the Management Services Agreement for any reason, (b) the Merger Agreement terminates pursuant to the termination provisions in Section 7.01 thereof or (c) the Merger is consummated at the Effective Time pursuant to the terms of the Merger Agreement.

Registration Rights Agreement

Concurrently with the execution of the Merger Agreement Amendment, SunEdison and 313 entered into a registration rights agreement, dated as of December 9, 2015 (the “Registration Rights Agreement”), pursuant to which, subject to the terms thereof, SunEdison has granted certain registration rights in favor of 313 in respect of the shares of SunEdison common stock and Convertible Notes to be received by 313 as a portion of the Merger Consideration and the shares of SunEdison common stock to be issued upon conversion of the Convertible Notes.

Letter Agreement Regarding Intercompany Agreements

Pursuant to certain agreements (the “Intercompany Agreements”), Vivint Solar and Vivint, Inc., Vivint Solar’s affiliated company and a wholly owned indirect subsidiary of 313, and/or their respective affiliates provide certain rights, licenses and/or services to each other in order to facilitate Vivint Solar’s transition from Vivint, Inc. Concurrently and in connection with the execution of the Merger Agreement, SunEdison, Vivint, Inc. and Vivint Solar entered into a letter agreement (the “Letter Agreement”), dated July 20, 2015, pursuant to which the parties have agreed to meet to, in good faith, discuss a transition plan effective as of the consummation of the Merger and negotiate and amend and restate certain of the Intercompany Agreements to restate and in certain cases expedite Vivint Solar’s transition from its dependencies with Vivint, Inc., including with respect to the information technology systems, intellectual property and other assets and resources that are necessary for the conduct of its business in a manner consistent with past practice. The parties also agreed, among other things, to (i) subject to the finalization and execution of a transitional trademark license regarding Vivint Solar’s continued use of the “Vivint Solar” trademark for a limited duration for purposes of phase-out use following the consummation of the Merger, terminate the Trademark License Agreement between Vivint Solar Licensing, LLC and Vivint Solar, dated September 30, 2014, (ii) terminate the Product Development and Supply Agreement between Vivint Solar Developer and Vivint, Inc., dated September 30, 2014, (iii) terminate the covenants of non-competition in the Non-Competition Agreement between Vivint Solar and Vivint, Inc., dated September 30, 2014 and (iv) terminate Schedule #3 to the Marketing and Customer Relations Agreement between Vivint Developer and Vivint, Inc., dated September 30, 2014, in each case effective as of the consummation of the Merger. The Letter Agreement will continue until the earliest to occur of: (a) the last of the Intercompany Agreements terminates or is amended and restated by the parties thereto pursuant to the Letter Agreement, (b) 24 months after the consummation of the Merger, and (c) termination of the Merger Agreement (unless the Letter Agreement is earlier terminated by mutual written agreement of the parties thereto). For further information on the Letter Agreement, please see the section entitled “The Merger—Agreements Related to the Merger” on page 73.

Recommendation of Vivint Solar’s Board of Directors; Reasons for Vivint Solar’s Board of Directors’ Recommendation (see page 75)

Vivint Solar’s board of directors believes that the Merger Agreement and the Merger are advisable and in the best interests of Vivint Solar and its stockholders and has unanimously approved the Merger Agreement and the Merger, and unanimously recommends that Vivint Solar stockholders vote “FOR”

 



 

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adoption of the Merger Agreement and “FOR” the adoption of the approval of the adjournment of the Special Meeting of Stockholders, if necessary, to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement at the time of the Special Meeting of Stockholders.

Vivint Solar Stockholders Entitled to Vote

Vivint Solar stockholders of record at the close of business on             ,      (the “Record Date”) are entitled to receive notice of and to vote at Vivint Solar’s special meeting of stockholders and at any adjournments or postponement thereof (the “Special Meeting of Stockholders”). On the Record Date, there were              shares of Vivint Solar common stock outstanding and eligible to be voted at the Special Meeting of Stockholders. Each share of Vivint Solar common stock entitles its record holder to one vote on each matter submitted to the stockholders.

Vote Required

Assuming a quorum is present, the vote requirements for the various proposals are as follows:

 

    Adoption of the Merger Agreement: Approval of the proposal to adopt the Merger Agreement requires the affirmative vote of a majority of the outstanding shares of Vivint Solar common stock that are entitled to vote at the Special Meeting of Stockholders.

 

    All Other Matters: All other matters on the agenda will be decided by the affirmative vote of a majority of the shares of Vivint Solar common stock represented, in person or by proxy, and entitled to vote at the Special Meeting of Stockholders (provided that a quorum need not be present to approve the proposal to adjourn the stockholder meeting to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement).

Voting by Vivint Solar Directors and Executive Officers

As of the Record Date, directors and executive officers of Vivint Solar and their affiliates were entitled to vote              shares of Vivint Solar common stock, or approximately     % of the shares of Vivint Solar common stock outstanding on that date. The affirmative vote (or written consent) of a majority of the outstanding shares of Vivint Solar common stock that are entitled to vote at the Special Meeting of Stockholders is required to adopt the Merger Agreement. Each director and executive officer and each of their affiliates has indicated his or her present intention to vote, or cause to be voted, the shares of Vivint Solar common stock owned by him or her “FOR” the adoption of the Merger Agreement.

Opinion of Vivint Solar’s Financial Advisors (see page 81)

Opinion of Morgan Stanley

Morgan Stanley & Co. LLC (“Morgan Stanley”) was retained by Vivint Solar’s board of directors to act as its financial advisor in connection with the proposed Merger. On July 19, 2015, Morgan Stanley rendered an oral opinion, which was subsequently confirmed in writing on July 20, 2015, to Vivint Solar’s board of directors to the effect that, as of July 20, 2015 and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in the written opinion, the Implied Initial Merger Consideration (as defined herein) to be received by the holders of shares of Vivint Solar common stock (other than any such holder entering into the original Voting Agreement) pursuant to the original Merger Agreement was fair from a financial point of view to such holders. On December 9, 2015, Morgan Stanley rendered its oral opinion, which was subsequently confirmed in writing as of that same date, to Vivint Solar’s board of directors to the effect that, as of December 9, 2015 and based

 



 

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upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in the written opinion, the Implied Pre-Notice Merger Consideration (as defined herein) to be received by the holders of shares of Vivint Solar common stock (other than any such holder entering into the Voting Agreement) pursuant to the Merger Agreement (as amended by the Merger Agreement Amendment) was fair from a financial point of view to such holders. On December 11, 2015, Morgan Stanley rendered its oral opinion, which was subsequently confirmed in writing as of that same date, to Vivint Solar’s board of directors to the effect that, as of December 11, 2015 and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in the written opinion, the Implied Notice Merger Consideration (as defined herein) to be received by the holders of shares of Vivint Solar common stock (other than any such holder entering into the Voting Agreement) pursuant to the Merger Agreement and the Notice was fair from a financial point of view to such holders.

The full text of the written opinions of Morgan Stanley is included as Annex J, Annex K and Annex L to this proxy statement and such opinions are incorporated herein by reference. You should read the opinions carefully in their entirety for a description of the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken. Morgan Stanley addressed its opinions to Vivint Solar’s board of directors, and none of the opinions constitute a recommendation to any stockholder as to how to vote or as to any other action that a stockholder should take relating to the Merger.

Opinion of Duff & Phelps

Vivint Solar, Inc. engaged Duff & Phelps, LLC to render an opinion as to the fairness, from a financial point of view, to the Public Stockholders of (1) that portion of the Additional Cash Consideration that would be attributable toward the Note Consideration in the Notice payable in the aggregate in respect of all Public Shares relative to the aggregate amount of the aggregate Merger Consideration that will be paid for all 313 Shares pursuant to clause (III) of Section 2.01(b)(ii)(B) of the Merger Agreement and (2) that portion of the Additional Cash Consideration that would be attributable toward the Stock Consideration in the Notice payable in the aggregate in respect of all Public Shares relative to the aggregate amount of the aggregate Merger Consideration that will be paid for all 313 Shares pursuant to clause (V) and clause (VII) of Section 2.01(b)(ii)(B) of the Merger Agreement.

On December 11, 2015, Duff & Phelps delivered its analysis and opinion to the board of directors of Vivint Solar that, as of the date and subject to the assumptions, qualifications, and limitations set forth therein, (1) the portion of the Additional Cash Consideration that would be attributable toward the Note Consideration in the Notice payable in the aggregate in respect of all Public Shares relative to the aggregate amount of the aggregate Merger Consideration that will be paid for all 313 Shares pursuant to clause (III) of Section 2.01(b)(ii)(B) of the Merger Agreement and (2) the portion of the Additional Cash Consideration that would be attributable toward the Stock Consideration in the Notice payable in the aggregate in respect of all Public Shares relative to the aggregate amount of the aggregate Merger Consideration that will be paid for all 313 Shares pursuant to clause (V) and clause (VII) of Section 2.01(b)(ii)(B) of the Merger Agreement, is fair from a financial point of view to Vivint Solar’s stockholders (other than 313) (without giving effect to any impact of the Merger on any particular stockholder other than in its capacity as a stockholder).

The full text of the written opinion of Duff & Phelps, which sets forth, among other things, assumptions made, procedures followed, matters considered and qualifications and limitations of the review undertaken in rendering the opinion, is attached as Annex M to this proxy statement and is incorporated by reference herein. You are urged to read the opinion carefully in its entirety prior to making any investment decision.

 



 

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Interests of Vivint Solar’s Directors and Executive Officers in the Merger (see page 119)

When considering the recommendation of Vivint Solar’s board of directors that you vote to approve the proposal to adopt the Merger Agreement, you should be aware that certain members of the board of directors and executive officers of Vivint Solar have economic interests in the Merger that are different from, or are in addition to, the interests of Vivint Solar stockholders generally. Vivint Solar’s board of directors was aware of and considered these interests to the extent that they existed at the time, among other matters, in approving the Merger Agreement and the Merger and recommending that the Merger Agreement be adopted by stockholders.

Certain members of Vivint Solar’s board of directors are affiliated with 313 and/or The Blackstone Group L.P. (together with its affiliates, other than portfolio companies, and 313, collectively “Blackstone”), whose affiliated fund controls 313. Accordingly, such members of Vivint Solar’s board of directors may have an indirect interest in the portion of the Merger Consideration to be paid to 313, which is different from the Merger Consideration to be paid in respect of Public Shares as described above.

In addition, Vivint Solar’s executive officers are parties to agreements with Vivint Solar that were amended in connection with the Merger and provide for certain benefits upon a change in control of Vivint Solar, including the Merger, and for severance benefits if their employment is terminated under certain circumstances in connection with a change in control of Vivint Solar, including the Merger. Furthermore, certain Vivint Solar compensation and benefit plans and arrangements provide for accelerated vesting of certain equity awards held by Vivint Solar executive officers and directors upon a change in control of Vivint Solar, including the consummation of the Merger.

Certain executive officers have agreed to waive a portion of this accelerated vesting, and have their unvested Vivint Solar options converted into unvested SunEdison options at the Effective Time. In addition, certain members of Vivint Solar’s management have entered into employment agreements with Vivint Solar, which will be effective as of the Closing Date that amend certain provisions applicable to their Vivint Solar equity awards, certain terms of their severance agreements with Vivint Solar and promise grants of SunEdison RSUs following the Effective Time.

Additionally, Vivint Solar’s board of directors has approved a transaction and retention bonus plan to pay an aggregate of $10 million in transaction and retention bonuses to employees of Vivint Solar, including certain executive officers. The allocation of these bonuses was made by Vivint Solar’s board of directors in consultation with Vivint Solar’s chief executive officer.

Additionally, certain investment funds affiliated with Blackstone, whose affiliated funds also control Vivint Solar’s controlling stockholder, 313, have a minority investment in TerraForm Global, Inc., a yieldco subsidiary (“TerraForm Global”), which is not a party to this transaction and which is not expected to hold any of the Vivint Solar assets.

For more information, see the section entitled “The Merger—Interests of Vivint Solar’s Directors and Executive Officers in the Merger” beginning on page 119.

Treatment of Vivint Solar Equity Awards (see page 125)

As a result of the Merger, the treatment of Vivint Solar’s equity awards will be as follows:

Vested Options

Subject to any written agreement between the relevant holder and Vivint Solar and/or SunEdison (including as to certain options held by certain members of Vivint Solar’s management team that will be subject to

 



 

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additional vesting, as described herein), at the Effective Time, each option to acquire shares of Vivint Solar common stock that is outstanding, vested and unexercised as of immediately prior to the Effective Time or that vests as a result of the occurrence of the Effective Time will, without any action on the part of SunEdison, Merger Sub, Vivint Solar or the holder thereof, other than Vivint Solar delivering any notices required pursuant to the terms of the applicable Vivint Solar equity plan, be converted into and become a right to receive an amount in cash (without interest), less any required tax withholding (the “Option Payment”), equal to the product of: (i) the aggregate number of shares of Vivint Solar common stock subject to such option immediately prior to the Effective Time and (ii) an amount equal to the excess, if any, of (1) the Public Cash Consideration less (2) the exercise price per share of such option.

Vested Restricted Stock Units

Subject to any written agreement between the relevant holder and Vivint Solar and/or SunEdison, each outstanding RSU (or portion thereof) to be settled in shares of Vivint Solar common stock that becomes vested as a result of the consummation of the Merger will be treated as a share of Vivint Solar common stock and be converted into the right to receive the Merger Consideration.

Unvested Options and Restricted Stock Units

Subject to any written agreement between the relevant holder and Vivint Solar and/or SunEdison, as of the Effective Time, each option to acquire shares of Vivint Solar common stock that is outstanding and unexercised immediately prior to the Effective Time (other than a vested option) will be assumed by SunEdison in the Merger and converted into an option to purchase SunEdison common stock, and each RSU of Vivint Solar (or a portion thereof) that is outstanding as of immediately prior to the Merger (but excluding any RSU of Vivint Solar (or portion thereof) that becomes vested as a result of the consummation of the Merger) will be assumed by SunEdison and converted into a RSU of SunEdison. With respect to any such equity awards so assumed by SunEdison, such equity awards will be assumed on terms substantially in effect prior to the assumption (but taking into account any changes thereto provided for in the applicable Vivint Solar stock plan, in any award agreement or in such equity awards by reason of the Merger Agreement or the Merger), except for adjustments to the underlying number of shares and, with respect to options, the exercise price based on an equity award exchange ratio reflected in the Merger Agreement.

Each then outstanding and unvested option or RSU immediately prior to the Effective Time that is held by a non-employee director or person who shall not continue to provide services to Vivint Solar or any subsidiary on or after the Effective Time will vest in full as of immediately prior to the Effective Time and be treated as a vested option or a RSU.

LTIP Awards

Each right of any kind, contingent or accrued, vested or unvested, to acquire or receive a share of Vivint Solar common stock or benefits measured by the value of such a share (an “LTIP Award”) issued under an LTIP Plan (as defined in the Merger Agreement) that is outstanding immediately prior to the Effective Time will, without any action on the part of SunEdison or Vivint Solar, become fully vested as a result of the Merger and be converted into the right to receive a payment calculated in accordance with the applicable LTIP Plan, and payable in accordance with the terms thereof.

For more information, see the section entitled “The Merger—Treatment of Vivint Solar Equity Awards” beginning on page 125.

 



 

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Listing of SunEdison Common Stock, Delisting of Vivint Solar Common Stock and Issuance of Convertible Notes (see page 114)

It is a condition to the consummation of the Merger that the shares of SunEdison common stock to be issued to Vivint Solar equity holders pursuant to the Merger Agreement be approved for listing on the NYSE, subject to official notice of issuance, prior to the Closing Date. Following the consummation of the Merger, shares of Vivint Solar common stock currently listed on the NYSE will be delisted and will be deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

At or prior to the consummation of the Merger, SunEdison will cause the Indenture to be executed by and between SunEdison and the Trustee and delivered to Vivint Solar.

Appraisal Rights of Dissenting Vivint Solar Stockholders (see page 115)

Holders of Vivint Solar common stock that is issued and outstanding immediately prior to the Effective Time who do not vote in favor of the adoption of the Merger Agreement and who comply with the applicable requirements of Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”) and do not otherwise withdraw or lose the right to appraisal under Delaware law have the right to seek appraisal of the fair value of their shares of Vivint Solar common stock, as determined by the Delaware Court of Chancery, if the Merger is completed. The “fair value” of Vivint Solar common stock as determined by the Delaware Court of Chancery may be more or less than, or the same as, the value of the Merger Consideration per share that holders of Vivint Solar common stock are otherwise entitled to receive under the terms of the Merger Agreement.

Holders of Vivint Solar common stock who wish to preserve any appraisal rights they may have must so advise Vivint Solar by submitting a demand for appraisal prior to the vote to adopt the Merger Agreement and must otherwise follow the procedures prescribed by Section 262 of the DGCL. A person having a beneficial interest in shares of Vivint Solar common stock held of record in the name of another person, such as a broker, bank or other nominee, must act promptly to cause the record holder to follow the steps summarized in this proxy statement and in a timely manner to perfect appraisal rights. In view of the complexity of Section 262 of the DGCL, Vivint Solar stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors.

Comparison of Stockholder Rights and Corporate Governance Matters (see page 168)

Vivint Solar stockholders receiving shares of SunEdison common stock in connection with the Merger will have different rights once they become stockholders of SunEdison due to differences between the governing corporate documents of Vivint Solar and the governing corporate documents of SunEdison. These differences are described in detail in the sections entitled “Description of Capital Stock of SunEdison” beginning on page 154 and “Comparison of Stockholder Rights and Corporate Governance Matters” beginning on page 168.

Reasonable Best Efforts and Regulatory Matters (see page 151)

SunEdison and Vivint Solar have agreed to cooperate and use reasonable best efforts to obtain all regulatory approvals required to complete the transactions contemplated by the Merger Agreement. For an acquisition transaction meeting certain size thresholds, such as the Merger, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), requires the parties to file notification and report forms with the Antitrust Division of the United States Department of Justice (the “DOJ”) and the Federal Trade Commission (the “FTC”) and to observe specified waiting period requirements before completing the Merger. SunEdison and Vivint Solar have filed the required notifications with the Antitrust Division of the DOJ and the FTC. On August 13, 2015, the FTC and DOJ granted early termination of the waiting period under the HSR Act.

 



 

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Conditions to the Merger (see page 146)

Conditions to Each Party’s Obligations to Effect the Merger

SunEdison’s, Merger Sub’s and Vivint Solar’s obligations to effect the Merger are conditioned upon the satisfaction or waiver of each of the following conditions:

 

    the Merger Agreement must have been duly adopted by holders of a majority of the outstanding shares of Vivint Solar common stock;

 

    no temporary restraining order or preliminary or permanent injunction or other order, in each case, by any court of competent jurisdiction preventing, prohibiting, restraining, enjoining or rendering illegal the consummation of the Merger or the other transactions contemplated by the Merger Agreement shall have been issued and be continuing in effect; and

 

    no applicable law of a governmental authority of competent jurisdiction shall be in effect prohibiting or rendering illegal the consummation of the Merger or the other transactions contemplated by the Merger Agreement.

Conditions to Obligations of SunEdison and Merger Sub

SunEdison’s and Merger Sub’s obligations to effect the Merger are also subject to the satisfaction or waiver of each of the following conditions:

 

    certain representations and warranties by Vivint Solar in the Merger Agreement related to (i) capitalization must be true and correct (without giving effect to any materiality qualifications or material adverse effect qualifications with respect to Vivint Solar) as of the Closing Date, as if made on and as of such date (or if made as of a specific earlier date, as of such date), except for any de minimis inaccuracies; and (ii) authority, brokers and amendment must be true and correct (without giving effect to any materiality qualifications or material adverse effect qualifications with respect to Vivint Solar) as of the Closing Date, as if made on and as of such date (or if made as of a specific earlier date, as of such date) in all material respects;

 

    the remaining representations and warranties made by Vivint Solar in the Merger Agreement must be true and correct (without giving effect to any materiality qualification or material adverse effect qualification with respect to Vivint Solar) as of the Closing Date, as if made on and as of such date (or if made as of a specific earlier date, as of such date), except where the failure of such other representations and warranties to be so true and correct does not have, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect with respect to Vivint Solar;

 

    Vivint Solar must have performed in all material respects all obligations required to be performed by it under the Merger Agreement at or prior to the Closing Date, other than failures to so perform that were not intentional;

 

    since the date of the Merger Agreement Amendment, there shall not have been any change, effect, event, occurrence, development or change in facts that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect with respect to Vivint Solar that is continuing;

 

    SunEdison must have received a certificate signed on behalf of Vivint Solar by an executive officer of Vivint Solar, dated the Closing Date, to the effect that the conditions in the prior four bullets under this heading “Conditions to Obligations of SunEdison and Merger Sub” have been satisfied; and

 

   

Vivint Solar shall deliver on the Closing Date, to SunEdison, together with proof of filing the required notice to the Internal Revenue Service (“IRS”) under Treasury Regulation Section 1.897-2(h), a

 



 

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certification complying with the terms of Treasury Regulation Section 1.1445-2(c)(3) that the shares of Vivint Solar are not U.S. real property interests within the meaning of Section 897 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury Regulations promulgated thereunder.

Conditions to Obligations of Vivint Solar

Vivint Solar’s obligation to effect the Merger is also subject to the satisfaction or waiver of the following conditions:

 

    certain representations and warranties by SunEdison and Merger Sub in the Merger Agreement related to (i) voting requirements must be true and correct in all respects; (ii) capital structure must be true and correct (without giving effect to any materiality qualifications or material adverse effect qualifications with respect to SunEdison) except for de minimis inaccuracies; and (iii) authority, amendment, brokers and ownership of Vivint Solar capital stock must be true and correct (without giving effect to any materiality qualifications or material adverse effect qualifications with respect to SunEdison) in all material respects, in each case as of the Closing Date, as if made on and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date);

 

    the remaining representations and warranties made by SunEdison and Merger Sub in the Merger Agreement must be true and correct (without giving effect to any materiality qualifications or material adverse effect qualifications with respect to SunEdison, except representations and warranties related to the absence of certain changes or events) except where the failure of such other representations and warranties to be so true and correct does not have, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect with respect to SunEdison, in each case as of the Closing Date, as if made on and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date);

 

    each of SunEdison and Merger Sub must have performed in all material respects all obligations required to be performed by it under the Merger Agreement at or prior to the Effective Time;

 

    Vivint Solar must have received a certificate signed on behalf of SunEdison by an executive officer, dated the Closing Date, to the effect that the conditions in the first, second and third bullets under this heading “Conditions to Obligations of Vivint Solar” have been satisfied;

 

    the shares of SunEdison common stock to be issued in the Merger must have been approved for listing on the NYSE, subject to official notice of issuance;

 

    since December 31, 2014, there shall not have been any change, effect, event, occurrence, development or state of facts that, individually or in the aggregate has had or would reasonably be expected to have a material adverse effect with respect to SunEdison that is continuing; and

 

    SunEdison and the Trustee shall have entered into the Indenture, dated as of the Closing Date, and delivered the Indenture to Vivint Solar.

Expected Timing of the Merger

SunEdison and Vivint Solar plan to complete the Merger as soon as is reasonably practicable and presently expect the Closing Date to occur in the first quarter of 2016. However, SunEdison and Vivint Solar cannot predict the exact timing of the Closing Date because it is subject to regulatory approvals and other conditions, and factors outside the control of both companies could result in the Merger being completed at a different time or not at all. Pursuant to the Merger Agreement, SunEdison and Merger Sub will not be required to consummate the Merger prior to January 29, 2016.

 



 

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Takeover Proposals (see page 141)

The Merger Agreement permits Vivint Solar, from the date of the Merger Agreement Amendment until approval of the Merger by the Vivint Solar stockholders (the “Go-Shop Period”), to directly or indirectly solicit, initiate, engage in negotiations with or furnish any non-public information regarding Vivint Solar or any of its subsidiaries to any third party in connection with or in response to a competing takeover proposal. Vivint Solar is required to promptly make available to SunEdison any such non-public information provided to any third party making a takeover proposal (or such party’s representatives), and such third party must execute a confidentiality agreement on terms substantially similar to those of the confidentiality agreement between SunEdison and Vivint Solar, but such agreement shall not be required to include a standstill provision.

Material U.S. Federal Income Tax Consequences of the Merger (see page 110)

The exchange of Vivint Solar common stock for the Merger Consideration in the Merger will be a taxable transaction for U.S. federal income tax purposes and may also be taxable under state, local and non-U.S. income and other tax laws. The tax consequences of the Merger to each stockholder will depend on such stockholder’s own situation. Vivint Solar stockholders are urged to read the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 110, and to consult their tax advisors as to the U.S. federal income tax consequences of the Merger, as well as the effects of other federal, state, local, and non-U.S. tax laws.

Accounting Treatment (see page 114)

SunEdison prepares its financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). The Merger will be accounted for using the acquisition method of accounting. SunEdison will be treated as the acquirer for accounting purposes. See the section entitled “The Merger—Accounting Treatment” beginning on page 114.

 



 

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING OF STOCKHOLDERS

Set forth below are commonly asked questions and answers about the Merger (as defined below), the Merger Agreement (as defined below) and the special meeting of Vivint Solar stockholders (the “Special Meeting of Stockholders”) called in connection with the Merger and the transactions related thereto. These questions and answers do not address all questions that may be important to you as a Vivint Solar stockholder. For a more complete description of the legal and other terms of the Merger, please read carefully this entire proxy statement, including the Annexes hereto. See “Additional Information” beginning on page 199.

All references in this proxy statement to (i) “SunEdison” refer to SunEdison, Inc., a Delaware corporation; (ii) “Vivint Solar” refer to Vivint Solar, Inc., a Delaware corporation; (iii) “Merger Sub” refer to SEV Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of SunEdison; (iv) the “Merger Agreement” refer to the Agreement and Plan of Merger, dated as of July 20, 2015, as amended by the Amendment to the Agreement and Plan of Merger (the “Merger Agreement Amendment”), dated as of December 9, 2015, by and among SunEdison, Merger Sub and Vivint Solar, as it may be further amended from time to time; and (v) the “Merger” refer to the merger of Merger Sub with and into Vivint Solar, with Vivint Solar continuing as the surviving entity and as a wholly owned subsidiary of SunEdison. Throughout this proxy statement, SunEdison’s registered shares, par value $0.01 per share, are referred to as SunEdison common stock; and Vivint Solar’s common stock, $0.01 par value per share, is referred to as Vivint Solar common stock.

Questions About the Merger

 

Q: Why am I receiving this document?

A: SunEdison has agreed to acquire Vivint Solar pursuant to the terms of the Merger Agreement that is described in this proxy statement. Copies of the Merger Agreement and the Merger Agreement Amendment are attached to this proxy statement as Annex A and Annex B, respectively.

In order to complete the Merger, Vivint Solar stockholders must adopt the Merger Agreement. Vivint Solar is holding the Special Meeting of Stockholders to obtain this stockholder approval.

This proxy statement contains important information about the Merger and the Special Meeting of Stockholders, and you should read it carefully and in its entirety. The enclosed voting materials allow you to vote your shares without attending the Special Meeting of Stockholders in person.

You are receiving this proxy statement because Vivint Solar’s board of directors is soliciting proxies from its stockholders to vote at the Special Meeting of Stockholders on the adoption of the Merger Agreement and the other matters set forth in the notice of the Special Meeting of Stockholders and described in this proxy statement to be considered and acted on by the stockholders of Vivint Solar at the Special Meeting of Stockholders. Your proxy will be used to vote your shares at the Special Meeting of Stockholders or at any adjournment or postponement thereof. Vivint Solar will bear the cost of soliciting proxies in connection with the Special Meeting of Stockholders.

A proxy is a legal designation of another person to vote your shares on your behalf. See more information below on how to vote your shares.

Your vote is very important. We encourage you to vote as soon as possible. For more information on how to vote your shares, please see the section entitled “The Vivint Solar Special Meeting of Stockholders” beginning on page 36.

 

Q: What vote is required to adopt the Merger Agreement?

A: The affirmative vote or written consent of holders of a majority of the issued and outstanding shares of Vivint Solar common stock is the only vote of the holders of any Vivint Solar common stock necessary to adopt the Merger Agreement and thereby approve the Merger. As of December 15, 2015, there were 106,576,150 shares of

 

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Vivint Solar common stock outstanding. Because the vote required to adopt the Merger Agreement is based upon the total number of outstanding shares of Vivint Solar common stock entitled to vote, the failure to submit a proxy card (or the failure to submit a proxy by telephone or over the Internet or to vote in person at the Special Meeting of Stockholders), the failure to instruct your bank, broker or other nominee how to vote or the abstention from voting by a stockholder will have the same effect as a vote AGAINST the Merger Agreement.

 

Q: What is the effect of the Voting Agreement on the proposal to adopt the Merger Agreement?

A: Concurrently with the execution of the Merger Agreement, 313 Acquisition LLC (“313”), which owns approximately 77% of the voting power of the outstanding shares of Vivint Solar common stock entitled to be cast at the Special Meeting of Stockholders, entered into a voting agreement with SunEdison, as amended and restated on December 9, 2015, in connection with entry into the Merger Agreement Amendment (as may be further amended, the “Voting Agreement”), that obligates it to vote in favor of the proposal to adopt the Merger Agreement or to deliver a written consent, as the holder of a majority of the outstanding shares of Vivint Solar, approving and adopting the Merger Agreement and the transactions contemplated thereby, including the Merger, subject to certain exceptions and limitations described in the accompanying proxy statement under “The Merger—Agreements Related to the Merger—Voting Agreement.” The Voting Agreement is included in this proxy statement as Annex F. The approval of the proposal to adopt the Merger Agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Vivint Solar common stock entitled to vote on the matter at the Special Meeting of Stockholders.

 

Q: What will happen in the Merger?

A: Under the terms of the Merger Agreement, Merger Sub, a wholly owned subsidiary of SunEdison will merge with and into Vivint Solar, with Vivint Solar continuing as the surviving entity and as a wholly owned subsidiary of SunEdison.

 

Q: What will I receive for my shares of Vivint Solar common stock in the Merger?

A: Pursuant to the terms of the Merger Agreement and the notice delivered by Vivint Solar to SunEdison on December 13, 2015 (the “Notice”), pursuant to which Notice Vivint Solar exercised its option to elect that the holders of the Vivint Solar common stock other than our controlling Stockholder 313 Acquisition LLC (the “Public Stockholders”) receive merger consideration consisting of all cash, with 313 Acquisition LLC receiving a reduced amount of cash and all of the common stock and convertible notes otherwise issuable as merger consideration, Vivint Solar Stockholders will receive, at the effective time of the Merger (the “Effective Time”), the following:

(a) each share of Vivint Solar common stock issued and outstanding immediately prior thereto held by the Public Stockholders (such shares, excluding shares directly owned by Vivint Solar, SunEdison or Merger Sub, or any of Vivint Solar’s or SunEdison’s respective wholly-owned subsidiaries, or shares with respect to which appraisal rights are properly exercised under Delaware law, the “Public Shares”) will be converted into and will thereafter represent the right to receive:

(i) cash in the amount of $7.89 (the “Base Cash Consideration”);

(ii) an additional amount of cash consideration representing the fair market value of $3.30 in principal amount of 4-year convertible notes (the “Convertible Notes”) issued by SunEdison pursuant to an indenture to be entered into concurrently with the consummation of the Merger and convertible into SunEdison common stock (such principal amount of Convertible Notes, the “Note Consideration”);

(iii) an additional amount in cash consideration representing the fair market value of a number of shares of SunEdison common stock equal to the quotient determined by dividing $3.31 by the Signing Measurement

 

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Price (as defined below), and rounding the result to the nearest 1/100,000 of a share (such number of shares of SunEdison common stock, the “Signing Stock Consideration”); and

(iv) an additional amount in cash consideration (which will equal $0.75) representing the fair market value of a number of shares of SunEdison common stock equal to the quotient determined by dividing $0.75 by the Closing FMV (as defined below) and rounding the result to the nearest 1/100,000 of a share (such number of shares of SunEdison common stock, the “Additional Stock Consideration” and, together with the Signing Stock Consideration, the “Stock Consideration”);

the total amounts payable to each Public Share representing the fair market value of the Signing Stock Consideration (the fair market value of which is based on the Closing FMV” of such Signing Stock Consideration , as described below), the Additional Stock Consideration (the fair market value of which will equal $0.75) and the Note Consideration, the fair market value of which will be determined based on the formula described below) being referred to herein as the “Additional Cash Consideration” and together with the Base Cash Consideration payable in respect of the Public Shares, the “Public Cash Consideration”; and

(b) each share of Vivint Solar common stock that is owned by 313 Acquisition LLC (“313”) (such shares, the “313 Shares,” and together with the Public Shares, the “Participating Shares”) will be converted into and will thereafter represent the right to receive:

(i) the Base Cash Consideration less an amount in cash equal to the aggregate Additional Cash Consideration divided by the number of outstanding 313 Shares;

(ii) the Note Consideration multiplied by the total number of Participating Shares, allocated equally among such 313 Shares; and

(iii) the Stock Consideration multiplied by the total number of Participating Shares, allocated equally among such 313 Shares;

the total amounts payable to each 313 Share pursuant to clauses (b)(i) through (iii) being referred to herein as the “313 Merger Consideration”.

A copy of the Notice was filed by Vivint Solar with the SEC on Form 8-K. Accordingly, the “Merger Consideration” (as such term is used in this proxy statement) shall mean the Public Cash Consideration and the 313 Merger Consideration collectively.

As used herein, the “Signing Measurement Price” represents the volume weighted average price per share of SunEdison common stock (rounded down to the nearest cent) on the New York Stock Exchange (the “NYSE”) for the 30 consecutive trading days ending on (and including) the third trading day immediately prior to the Effective Time; provided that the calculation is subject to a “collar” which provides that if the Signing Measurement Price is less than $27.51, the Signing Stock Consideration will be equal to 0.120 shares of SunEdison common stock, and if the Signing Measurement Price is more than $33.62, the Signing Stock Consideration will be 0.098 shares of SunEdison common stock. Based on the trading price of SunEdison’s common stock as of December 18, 2015, the last practical trading day prior to the date of this preliminary proxy statement, and the collar, the Signing Stock Consideration would be equal to 0.120 shares of SunEdison common stock.

As used in this proxy statement, the “Closing FMV” represents the volume weighted average price per share of SunEdison common stock (rounded down to the nearest cent) on the NYSE for the five (5) consecutive trading days ending on (and including) the second trading day immediately prior to the Effective Time.

 

Q: How is the Merger Consideration being valued by Vivint Solar?

A: For the Public Stockholders as determined in accordance with the Notice, the fair market value of the per share Merger Consideration to be paid in exchange for the Public Shares is equal to an amount in cash that is equal to the sum of the following:

(i) The Base Cash Consideration, which is valued at $7.89.

 

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(ii) The fair market value of the Note Consideration. Pursuant to the Merger Agreement, the principal amount of Convertible Notes constituting the Note Consideration per share is equal to $3.30. Pursuant to the Notice, the fair market value of the principal amount of the aggregate Note Consideration payable to the holders of all Participating Shares will be determined by calculating the net present value (giving effect to all leap years) of cash amounts payable to holders of such Convertible Notes over time pursuant to the indenture governing the Convertible Notes, discounted by the average internal rate of return of each series of convertible notes of SunEdison outstanding as of December 13, 2015 (collectively, the “Reference Convertible Notes”). The internal rate of return for each series of the Reference Convertible Notes will be calculated based on the volume weighted average price of each series of Reference Convertible Notes (rounded down to the nearest cent) as reported by Bloomberg Financial Markets for the five consecutive trading days ending on (and including) the second trading day immediately prior to the Effective Time. The fair market value of the principal amount of the aggregate Note Consideration payable to the holders of all Participating Shares divided by the principal amount of such aggregate Note Consideration will result in a percentage (the “Note Percentage”) that establishes the fair market value of the Note Consideration relative to the principal amount of Convertible Notes that constitutes the Note Consideration. As such, the fair market value of the Note Consideration shall equal $3.30 multiplied by the Note Percentage.

(iii) The fair market value of the Signing Stock Consideration. Pursuant to the Merger Agreement, the number of shares of SunEdison common stock constituting Signing Stock Consideration will be determined based on the Signing Measurement Price; subject to the collar. Based on the trading price of the SunEdison common stock as of December 18, 2015 and the collar, the Signing Stock Consideration would be 0.120 shares of SunEdison common stock. Pursuant to the Notice, the fair market value of such SunEdison common stock will be equal to the product of the number of shares of SunEdison common stock to be paid as Signing Stock Consideration multiplied by the Closing FMV.

(iv) The fair market value of the Additional Stock Consideration. Pursuant to the Merger Agreement, the number of shares of SunEdison common stock constituting Additional Stock Consideration will be determined as the number of shares that, based on the Closing FMV, have a value equal to $0.75. Because the Notice providing that the fair market value of the Additional Stock Consideration is to be based on the Closing FMV, the fair market value of the Additional Stock Consideration will equal $0.75.

Pursuant to the Notice, the amount of Additional Cash Consideration payable per share of Vivint Solar common stock is equal to the sum of the cash amounts as determined in clauses (ii), (iii) and (iv) above.

For 313, the fair market value of the per share Merger Consideration payable in exchange for the 313 Shares is equal to the fair market value of the aggregate 313 Merger Consideration divided by the number of outstanding 313 Shares. The fair market value of the aggregate amount payable to 313 is equal to the sum of:

(i) Aggregate Cash. The total Cash Consideration payable to 313 less the aggregate Additional Cash Consideration payable in respect of all the Public Shares.

(ii) Aggregate Note Consideration. Pursuant to the Merger Agreement, 313 will receive a principal amount of Convertible Notes equal to $3.30 multiplied by the total number of Participating Shares. The fair market value of such aggregate consideration will be equal to the principal amount of the Convertible Notes payable to all Participating Shares multiplied by the Note Percentage.

(iii) Aggregate Stock Consideration. Pursuant to the Merger Agreement, 313 will receive a number of shares of SunEdison common stock equal to the Stock Consideration multiplied by the total number of Participating Shares. The fair market value of such aggregate consideration will be equal to the total number of shares of SunEdison common stock payable to 313 multiplied by the Closing FMV;

 

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In the event the number of shares of SunEdison common stock that would otherwise constitute the Stock Consideration would require SunEdison to seek approval from its stockholders pursuant to the rules and regulations of the NYSE or other securities laws, rules and regulations, the reference to $0.75 within the definition of Additional Stock Consideration will be reduced such that the total amount of the Stock Consideration would equal the maximum number of shares of SunEdison common stock that could be issued without such stockholder approval being required (the amount by which such reference to $0.75 is so reduced, the “Reduction”), and the amount of Cash Consideration will be increased by the amount of such Reduction. See the section entitled “The Merger Agreement—The Merger Consideration” beginning on page 131 of the accompanying proxy statement.

Based on the five day volume weighted average trading price of $5.85 of SunEdison common stock on the NYSE for the five consecutive trading days ended on December 18, 2015, the fair market value of the Signing Stock Consideration would be $0.70 and the fair market value of the Additional Stock Consideration would be $0.75, in each case per share of Vivint Solar common stock. As of the close of business on such date, the fair market value of the Note Consideration would be $1.77 based on the formula described above. Accordingly, the total value of the Merger Consideration would have represented approximately $11.11 per share of Vivint Solar common stock as of such date. However, the value of the Merger Consideration will fluctuate with the market price of SunEdison common stock and will not be known at the time the Vivint Solar stockholders vote on the Merger at the Special Meeting of Stockholders. SunEdison common stock is listed on the NYSE under the trading symbol “SUNE,” and we encourage you to obtain quotes for the SunEdison common stock.

The Convertible Notes will be issued pursuant to an indenture to be entered into concurrently with the consummation of the Merger by and between SunEdison and Computershare Trust Company, National Association, as trustee (the “Trustee”), in the form attached as Annex I hereto (the “Indenture”). The Convertible Notes will constitute direct unsecured, senior obligations of SunEdison. The initial conversion price for the Convertible Notes will be 140% of the Signing Measurement Price, but the Signing Measurement Price for purposes of this calculation may not exceed $33.62 or be lower than $27.51. The Convertible Notes will bear interest at a rate of 2.25% per year, payable semiannually in arrears in cash. The Convertible Notes will have a maturity date that is four years from issuance. The Convertible Notes will be issuable only in registered form without coupons and in minimum denominations of $100 and any integral multiple of $100. Holders of the Convertible Notes may surrender the Convertible Notes for conversion only under limited circumstances, as described in the Indenture. Upon conversion SunEdison will deliver, at its election, (i) solely cash, (ii) solely shares of SunEdison common stock, or (iii) a combination of cash and shares of SunEdison common stock, with each of clauses (i), (ii) and (iii) to be based on a daily conversion value calculated on a proportionate basis for each trading day of a 25-day observation period. The conversion rate will be subject to adjustment in certain circumstances, as described in the Indenture.

SunEdison will not issue any fractional shares of SunEdison common stock or Convertible Notes with a denomination of less than $100 in the Merger. Holders of Vivint Solar common stock who would otherwise be entitled to a fractional share of SunEdison common stock or Convertible Notes with a denomination of less than $100 will receive cash in lieu thereof.

Pursuant to the Merger Agreement, all outstanding equity securities of Vivint Solar at the time of the Merger will be cancelled. The shares of SunEdison common stock to be issued in connection with the Merger will be newly issued shares. Consequently, neither the trading price of Vivint Solar common stock nor the trading price of SunEdison common stock reflects the price at which SunEdison common stock will trade following the Merger.

Assuming the Merger had been consummated on December 18, 2015, it is expected that the aggregate number of shares of SunEdison common stock issuable in the Merger to 313 (not including any such shares underlying the Convertible Notes) would have represented approximately 7.7% of the outstanding equity ownership of SunEdison (based on the total outstanding shares of SunEdison common stock as of November 2, 2015).

 

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For further information, please see the section titled “The Merger Agreement—The Merger Consideration” beginning on page 131.

 

Q: How does the value of the Merger Consideration in the Merger Agreement compare to the value of the consideration in the original merger agreement that was signed on July 20, 2015?

A: Under the terms of the original Merger Agreement, each Vivint Solar stockholder would have received for each outstanding share of Vivint Solar common stock:

(i) cash in the amount of $9.89;

(ii) $3.30 in principal amount of 5-year convertible notes to be issued by SunEdison and convertible into SunEdison common stock; and

(iii) the number of shares of SunEdison common stock equal to the quotient determined by dividing $3.31 by the Signing Measurement Price (which definition is the same as in the Merger Agreement), and rounding the result to the nearest 1/100,000 of a share.

Based on the trading price of the SunEdison common stock as of December 18, 2015 and the application of the formula described above for determining the fair market value of the convertible notes, the value of the merger consideration under the original Merger Agreement would have been $12.13 as of such date. As such, due to the reduction in cash consideration, the increase in stock consideration, and the decrease in the maturity date of the Convertible Notes from five years to four years, the value of the Merger Consideration represents a reduction of $1.02 in the fair market value of the per share merger consideration when compared to the fair market value of the per share merger consideration payable under the terms of the original Merger Agreement.

 

Q: What are the terms of the Convertible Notes?

A: The Convertible Notes issued in the Merger, which will be issued only to 313, will be issued pursuant to an indenture to be entered into concurrently with the consummation of the Merger (the “Indenture”), by and between SunEdison and Computershare Trust Company, National Association, as trustee (the “Trustee”), in the form attached as Annex I hereto. The Convertible Notes will constitute direct unsecured, senior obligations of SunEdison. The initial conversion price for the Convertible Notes will be 140% of the Signing Measurement Price, but the Signing Measurement Price for purposes of this calculation may not exceed $33.62 or be lower than $27.51. The Convertible Notes will bear interest at a rate of 2.25% per year, payable semiannually in arrears in cash. The Convertible Notes have a maturity date that is four years from issuance. The Convertible Notes will be issuable only in registered form without coupons and in minimum denominations of $100 and any integral multiple of $100. The conversion rate will be subject to adjustment in certain circumstances, as described in the Indenture. For more information on the Convertible Notes, please see the sections entitled “The Merger Agreement—The Merger Consideration—Conversion of Vivint Solar Common Stock” beginning on page 131 and “Description of Convertible Notes” beginning on page 160.

 

Q: Is the Merger taxable to the Vivint Solar stockholders for U.S. federal income tax purposes?

A: The exchange of Vivint Solar common stock for the Merger Consideration in the Merger will be a taxable transaction for U.S. federal income tax purposes and may also be taxable under state, local and non-U.S. income and other tax laws. The tax consequences of the Merger to each stockholder will depend on such stockholder’s own situation. Vivint Solar stockholders are urged to read the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 110, and to consult their tax advisers as to the U.S. federal income tax consequences of the Merger, as well as the effects of other federal, state, local, and non-U.S. tax laws.

 

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Q: What conditions must be satisfied to consummate the Merger?

A: The consummation of the Merger is subject to a number of conditions, including, among others:

 

    the adoption of the Merger Agreement by the required vote of the Vivint Solar stockholders;

 

    no (i) temporary restraining order or preliminary or permanent injunction or other order, in each case, by any court of competent jurisdiction preventing, prohibiting, restraining, enjoining or rendering illegal the consummation of the Merger or the other transactions contemplated by the Merger Agreement will have been issued and be continuing in effect or (ii) applicable law of a governmental authority of competent jurisdiction will be in effect prohibiting or rendering illegal the consummation of the Merger or the other transactions contemplated by the Merger Agreement;

 

    the representations and warranties of each party to the Merger Agreement remaining true and correct at signing and as of the date of the consummation of the Merger (the “Closing Date”), subject, in certain instances, to materiality or material adverse effect qualifiers described in further detail in this proxy statement;

 

    the performance or compliance by each party to the Merger Agreement in all material respects with its obligations and covenants under the Merger Agreement required to be performed by such party at or prior to the Closing Date, other than, in the case of Vivint Solar only, failures to so perform that were not intentional;

 

    the shares of SunEdison common stock issuable as part of the Merger Consideration shall have been approved for listing on the NYSE upon official notice of issuance; and

 

    (a) in the case of SunEdison, the absence of any continuing material adverse effect concerning the business, assets, liabilities, operations or financial condition of SunEdison and its subsidiaries, taken as a whole, since the date of the Merger Agreement and (b) in the case of Vivint Solar, the absence of any continuing material adverse effect concerning the business, assets, liabilities, operations or financial condition of Vivint Solar and its subsidiaries, taken as a whole, since the date of the Merger Agreement Amendment.

The Effective Time will occur upon the filing of the certificate of merger with the State of Delaware or at such later time as is agreed to by the parties hereto and specified in the certificate of merger. For additional information on the conditions to closing of the Merger, please see the section titled “The Merger Agreement—Conditions to the Merger” beginning on page 146.

 

Q: How will SunEdison fund the cash portion of the Merger Consideration?

A: SunEdison intends to finance the Cash Consideration and the Additional Cash Consideration primarily from the proceeds of the Term Facility and the TERP Acquisition, each of which is described below.

In connection with the Merger Agreement Amendment, SunEdison entered into a second amended and restated debt commitment letter, dated as of December 9, 2015, with Goldman Sachs Bank USA, Barclays Bank PLC, Citigroup Global Markets Inc. and UBS Securities LLC, pursuant to which, among other things, such institutions have committed to provide, subject to the terms and conditions thereof, a $300 million secured term loan facility (the “Term Facility”) to a wholly owned indirect subsidiary of SunEdison (the “Term Borrower”). SunEdison intends to transfer certain development assets of Vivint Solar and of SunEdison’s residential solar business to the Term Borrower on the date of the consummation of the Merger. The funding of the Term Facility is subject to customary conditions, including the negotiation of definitive documentation and other customary closing conditions.

On December 9, 2015, in connection with its entry into the Merger Agreement Amendment, SunEdison also entered into an Amended and Restated Purchase Agreement (as it may be further amended, the “TERP Purchase

 

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Agreement”) with its controlled affiliate, TerraForm Power, LLC (“Terra LLC”), pursuant to which SunEdison will sell to Terra LLC the equity interests in certain subsidiaries of Vivint Solar (the “Purchased Subsidiaries”) holding renewable assets constituting Vivint Solar’s rooftop solar portfolio (the “TERP Acquisition”), for a purchase price (the “TERP Cash Consideration”) equal to the product of (i) the lesser of (x) the actual installed capacity (in megawatts (“MW”)) of the residential solar operating systems owned by the Purchased Subsidiaries on the Closing Date and (y) 523 MW, multiplied by (ii) $1,700,000, to be paid concurrently with the consummation of the Merger. SunEdison expects that the TERP Cash Consideration will be approximately $799 million based on the number of installed megawatts expected to be delivered at closing (currently expected to be approximately 470 MW). Pursuant to the TERP Purchase Agreement, Terra LLC may, at its option, choose to assume (or have a subsidiary of Terra LLC assume) the obligations under that certain Loan Agreement, dated as of September 12, 2014 (as amended, restated, amended and restated, supplemented or otherwise modified, the “Aggregation Facility”) among Vivint Solar Financing I, LLC, a Delaware limited liability company, Vivint Solar Holdings, Inc., a Delaware corporation, the other guarantors and lenders party thereto from time to time, and Bank of America, N.A., as administrative agent and collateral agent or any additional or other indebtedness that is secured by direct or indirect interests in the Purchased Subsidiaries and that supplements, refinances or replaces the Aggregation Facility (such additional indebtedness, together with the Aggregation Facility, the “Indebtedness”). To the extent obligations under any Indebtedness are assumed by Terra LLC (or a subsidiary of Terra LLC on or before the consummation of the TERP Acquisition then the TERP Cash Consideration will be reduced on a dollar-for-dollar basis by an amount equal to the then outstanding aggregate amount of the Indebtedness so assumed. If any Purchased Subsidiary is obligated to repay any such Indebtedness and such Indebtedness remains outstanding as of the consummation of the TERP Acquisition, such Indebtedness will be deemed to have been assumed by Terra LLC. At the consummation of the TERP Acquisition, a portion of the TERP Cash Consideration, estimated to be up to $75,000,000, may be placed into escrow and be unavailable to SunEdison to fund its payment obligations under the Merger Agreement. The TERP Purchase Agreement contains customary representations, warranties, covenants and conditions.

The TERP Purchase Agreement is not conditioned on Terra LLC’s receipt of any third-party financing. Terra LLC intends to finance the TERP Acquisition with existing cash, availability under the revolving credit facility of TerraForm Power Operating, LLC (“TerraForm Operating”), a controlled affiliate of SunEdison and controlled subsidiary of TerraForm Power, Inc. (“TerraForm Power”) and the assumption or incurrence of project-level debt. In addition, in connection with the TERP Purchase Agreement, TerraForm Operating has entered into a second amended and restated debt commitment letter, dated as of December 9, 2015, with Goldman Sachs Bank USA, Citigroup Global Markets Inc., Barclays Bank PLC and UBS AG, Stamford Branch (the “Bridge Lenders”), pursuant to which, among other things, the Bridge Lenders have committed to provide, subject to the terms and conditions thereof, borrowings under a $795 million unsecured bridge facility (the “Bridge Financing Commitment”). As of December 9, 2015, the Bridge Financing Commitment was reduced by $236.5 million based upon the principal amount outstanding and aggregate commitments available to be drawn under the Aggregation Facility, which is expected to be assumed by Terra LLC (or its subsidiary). Furthermore, the Bridge Financing Commitment is expected to be reduced by any increase in the commitments available to be drawn and actual borrowings under the Aggregation Facility occurring after December 9, 2015 and on or prior to the Effective Time. In addition, the Bridge Financing Commitment is required to be reduced by the release from escrow of certain project level reserves associated with TERP LLC’s assets in the United Kingdom, which are expected to be approximately $24 million and which were funded using a portion of the net proceeds from the GBP 313.5 million credit facility entered into by a subsidiary of TerraForm Operating on November 6, 2015. The funding of the Bridge Financing Commitment, as it may be reduced from time to time as described in this paragraph and in the associated commitment documents, is subject to the negotiation of definitive documentation and other customary closing conditions.

On December 9, 2015, SunEdison also entered into that certain Term Facility, Take/Pay and IDR Letter Agreement (the “TERP Letter Agreement”) with Terra LLC pursuant to which, SunEdison, among other things, agreed to use its reasonable best efforts to sell to third-party purchaser(s): (a) the “cash” or “sponsor” equity position in tax equity partnership or funds for the acquisition of residential solar systems that Terra LLC will be

 

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obligated to purchase from the Term Borrower under the take/pay agreement to be entered into between Terra LLC and the Term Borrower (the “Take/Pay Agreement”) and (b) the Purchased Subsidiaries acquired from Vivint Solar that Terra LLC would otherwise be obligated to purchase under the TERP Purchase Agreement, in each case, subject to certain conditions, including that the Merger has been consummated (including that SunEdison has wired to the paying agent under the Merger Agreement the full cash portion of the Merger Consideration and has available cash funds to pay its other obligations in connection with the Merger). If any such third party purchase and sale agreement is for 100 MW or more, then SunEdison will be required to obtain the consent of the Corporate Governance and Conflicts Committee of the Board of Directors of TerraForm Power prior to the entry into any such agreement. If SunEdison, Vivint Solar or any of its subsidiaries enters into an agreement for the sale of any Purchased Subsidiary to a third-party purchaser other than TerraForm Power or any of its subsidiaries between the date of the letter agreement and the consummation of the Merger, upon the consummation of the Merger, Terra LLC will be relieved of its obligations to purchase any such Purchased Subsidiary that Terra LLC did not acquire in connection with the consummation of the Merger. In addition, if the purchase price paid for a Purchased Subsidiary by any such third party purchaser(s) is less than the purchase price that Terra LLC would have otherwise been obligated to pay under the TERP Purchase Agreement, Terra LLC will not have any obligation to pay or reimburse SunEdison for any such shortfall amounts.

The TERP Letter Agreement further requires that SunEdison take certain actions to facilitate the repayment of the Term Facility by December 31, 2016 and that on December 31, 2016, SunEdison will repay the Term Facility in an amount equal to the lesser of (a) $25,000,000 and (b) the outstanding amount under the Term Facility as of such date. Furthermore, the TERP Letter Agreement provides that, concurrent with the closing of the Term Facility, SunEdison will make an equity contribution to the Term Borrower such that the Term Borrower will have at least $100 million cash on hand.

For additional information, please see the section titled “The Merger—Financing” beginning on page 71.

 

Q: Is SunEdison’s obligation to consummate the Merger subject to SunEdison’s receipt of financing?

A: No. Although SunEdison intends to finance the acquisition of Vivint Solar with the proceeds from the Term Facility and the TERP Acquisition and as described in “The Merger—Financing” beginning on page 71, SunEdison’s obligation to close the Merger is not conditioned upon receipt of such financing. As such, if SunEdison is unable to obtain any portion of such financing needed to consummate the Merger and such portion is required to fund any portion of the Cash Consideration or the Additional Cash Consideration or any fees, expenses and other amounts contemplated by the Merger Agreement to be paid by SunEdison, Merger Sub or Vivint Solar as the surviving corporation, SunEdison and Merger Sub will be obligated to take any and all actions necessary to obtain alternative financing in an amount sufficient to consummate the Merger and the transactions contemplated by the Merger Agreement.

 

Q: Is the consummation of the Merger conditioned on the approval of the Merger Agreement by SunEdison’s stockholders?

A: No. The consummation of the Merger is not conditioned on the approval of the Merger Agreement by SunEdison’s stockholders.

 

Q: Am I entitled to appraisal rights in connection with the Merger?

A: Under the General Corporation Law of the State of Delaware (the “DGCL”), Vivint Solar stockholders who do not vote for the adoption of the Merger Agreement have the right to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery if the Merger is completed, but only if they comply with all requirements of the DGCL, which are summarized in this proxy statement. This appraisal amount could be more than, the same as or less than the amount a Vivint Solar stockholder would be entitled to receive under the Merger Agreement. Any Vivint Solar stockholder intending to exercise appraisal rights, among other things,

 

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must submit a written demand for appraisal to Vivint Solar prior to the vote on the adoption of the Merger Agreement by Vivint Solar stockholders and must not vote or otherwise submit a proxy in favor of adoption of the Merger Agreement. Failure to follow exactly the procedures specified under the DGCL will result in the loss of appraisal rights. Because of the complexity of the DGCL relating to appraisal rights, if you are considering exercising your appraisal rights, Vivint Solar and SunEdison encourage you to seek the advice of your own legal counsel.

For additional information, please see the section titled “The Merger—Appraisal Rights of Dissenting Vivint Solar Stockholders” beginning on page 115.

 

Q: How do I exchange my shares of Vivint Solar common stock for Merger Consideration?

A: As soon as reasonably practicable after the Effective Time, instructions for exchanging your Vivint Solar book-entry shares for the Merger Consideration will be mailed to you. You should read these instructions carefully. Assuming the Merger is consummated and provided that you complete and submit any documentation in accordance with the instructions and include your certificates, if any, representing your shares of Vivint Solar common stock, you will not need to take any further action in order to receive the Merger Consideration, which Citibank, N.A. (in collaboration with Continental Stock Transfer and Trust Company) (the “Exchange Agent”) will forward to you promptly after determining the proper allocation of cash, SunEdison common stock and Convertible Notes to be paid or issued to Vivint Solar stockholders as of the Effective Time. Any SunEdison common stock and Convertible Notes you receive in the Merger will be issued in book-entry form.

 

Q: How will I receive the Merger Consideration to which I am entitled?

A: After receiving the proper documentation from you, the Exchange Agent will forward to you the cash, and with respect to 313, the shares of SunEdison common stock and the Convertible Notes, to which you are entitled. More information on the documentation you are required to deliver to the Exchange Agent may be found under the section titled “The Merger Agreement—The Merger Consideration—Exchange Procedures” beginning on page 134. 313 will not receive any fractional shares of SunEdison common stock or Convertible Notes with a denomination of less than $100 in the Merger and will instead receive cash in lieu of any such fractional shares of SunEdison common stock or Convertible Notes with a denomination of less than $100.

 

Q: What equity stake will 313 hold in SunEdison immediately following the consummation of the Merger?

A: The exact equity stake of 313 in SunEdison immediately following the Merger will depend on the number of shares of SunEdison common stock and Vivint Solar common stock issued and outstanding immediately prior to the Merger, as well as the Signing Measurement Price and the Closing FMV. Because the Signing Measurement Price is calculated based on the volume weighted average price per share of SunEdison common stock on the NYSE for the thirty (30) consecutive trading days ending on (and including) the third (3rd) trading day immediately prior to the closing of the Merger, and is subject to a collar (as described above), and because the Closing FMV is calculated based on the volume weighted average price per share of SunEdison common stock on the NYSE for the five (5) consecutive trading days ending on (and including) the second (2nd) trading day immediately prior to the closing of the Merger and is subject to the Reduction as described above, the exact equity stake that 313 will hold in SunEdison immediately following the Merger will not be calculable at the time of the Special Meeting of Stockholders.

 

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Q: Are there any risks in connection with the Merger or the related transactions that I should consider?

A: Yes. There are risks associated with all business combinations, including the Merger and the transactions related thereto. These risks are discussed in more detail in the sections entitled “Risk Factors” in SunEdison’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and Vivint Solar’s Annual Report on form 10-K for the fiscal year ended December 31, 2014, as updated by subsequent Quarterly Reports and other SEC filings, each of which is filed with the SEC and incorporated by reference into this proxy statement. See the section titled “Additional Information” beginning on page 199.

 

Q: How do Vivint Solar’s directors’ and executive officers’ interests in the Merger differ from mine?

A: When considering the recommendation of Vivint Solar’s board of directors that you vote to approve the proposal to adopt the Merger Agreement, you should be aware that certain members of the board of directors and executive officers of Vivint Solar have economic interests in the Merger that are different from, or are in addition to, the interests of Vivint Solar stockholders generally. Vivint Solar’s board of directors was aware of and considered these interests to the extent that they existed at the time, among other matters, in approving the Merger Agreement and the Merger and recommending that the Merger Agreement be adopted by stockholders.

Certain members of Vivint Solar’s board of directors are affiliated with 313 and/or Blackstone, whose affiliated fund controls 313. Accordingly, such members of Vivint Solar’s board of directors may have an indirect interest in the portion of the Merger Consideration to be paid to 313, which is different from the Merger Consideration to be paid in respect of the Public Shares as described above.

In addition, Vivint Solar’s executive officers are parties to agreements with Vivint Solar that were amended in connection with the Merger and provide for certain benefits upon a change in control of Vivint Solar, including the Merger, and for severance benefits if their employment is terminated under certain circumstances in connection with a change in control of Vivint Solar, including the Merger. Furthermore, certain Vivint Solar compensation and benefit plans and arrangements provide for accelerated vesting of certain equity awards held by Vivint Solar executive officers and directors upon a change in control of Vivint Solar, including the consummation of the Merger.

Certain executive officers have agreed to waive a portion of this accelerated vesting, and have their unvested Vivint Solar options converted into unvested SunEdison options at the Effective Time. In addition, certain members of Vivint Solar’s management have entered into employment agreements with Vivint Solar, which will be effective as of the Closing Date that amend certain provisions applicable to their Vivint Solar equity awards, certain terms of their severance agreements with Vivint Solar and promise grants of SunEdison restricted stock units following the Effective Time.

Additionally, Vivint Solar’s board of directors has approved a transaction and retention bonus plan to pay an aggregate of $10 million in transaction and retention bonuses to employees of Vivint Solar, including certain executive officers. The allocation of these bonuses was made by Vivint Solar’s board of directors in consultation with Vivint Solar’s chief executive officer.

Additionally, certain investment funds affiliated with Blackstone, whose affiliated funds also control Vivint Solar’s controlling stockholder, 313, have a minority investment in TerraForm Global, Inc., a yieldco subsidiary, which is not a party to this transaction and which is not expected to hold any of the Vivint Solar assets.

For more information, see the section entitled “The Merger—Interests of Vivint Solar’s Directors and Executive Officers in the Merger” beginning on page 119.

 

Q: Will 313’s shares of SunEdison common stock acquired in the Merger receive a dividend?

A: After the closing of the Merger, as a holder of SunEdison common stock 313 will receive the same dividends on shares of SunEdison common stock that all other holders of shares of SunEdison common stock will receive

 

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for any dividend for which the record date occurs after the Merger is completed. Any dividends with respect to shares of SunEdison common stock with a record date after the closing of the Merger and payable before the Merger Consideration is paid will be paid to 313, without interest, at the time of the payment of the Merger Consideration. SunEdison has never paid cash dividends on its capital stock. Any future SunEdison dividends will remain subject to approval by SunEdison’s board of directors.

 

Q: When do you expect the Merger to be completed?

A: Subject to the satisfaction or waiver of the closing conditions described under the section entitled “The Merger Agreement—Conditions to the Merger” beginning on page 146 of this proxy statement, including the adoption of the Merger Agreement by Vivint Solar stockholders at the Special Meeting of Stockholders, Vivint Solar and SunEdison expect that the Merger will be completed during the first quarter of calendar year 2016. However, it is possible that factors outside the control of both companies could result in the Merger being completed at a different time or not at all.

 

Q: What happens if the Merger is not completed?

A: If the Merger Agreement is not adopted by Vivint Solar stockholders or if the Merger is not completed for any other reason, Vivint Solar stockholders will not receive any consideration for their shares of Vivint Solar common stock. Instead, Vivint Solar will remain an independent public company, Vivint Solar common stock will continue to be listed and traded on the NYSE and registered under the Exchange Act and Vivint Solar will continue to file periodic reports with the SEC. If the Merger Agreement is terminated, under certain circumstances, Vivint Solar may be required to pay SunEdison a termination fee of $34.0 million.

In addition, if the Merger Agreement is terminated, under certain circumstances, Vivint Solar must reimburse SunEdison for out-of-pocket expenses up to a maximum of $15.0 million. Any such expense reimbursement will be credited towards the termination fee described above if required to be paid by Vivint Solar. In other circumstances, Vivint Solar may have a claim against SunEdison if SunEdison has breached its obligation under the Merger Agreement.

See the section entitled “The Merger Agreement—Termination Fees and Expenses” beginning on page 150 of this proxy statement and the section entitled “The Merger Agreement—Fees and Expenses” beginning on page 152 of this proxy statement.

Questions About the Special Meeting of Stockholders

 

Q: When and where will the Special Meeting of Stockholders be held?

A: The Special Meeting of Stockholders is scheduled to be held at 3301 N. Thanksgiving Way, Suite 500, Lehi, Utah 84043 on         ,         , 2016, at         , local time.

 

Q: On what am I being asked to vote?

A: Vivint Solar stockholders are being asked to vote on the following:

 

    to adopt the Merger Agreement; and

 

    on the approval of the adjournment of the Special Meeting of Stockholders, if necessary, to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement at the time of the Special Meeting of Stockholders.

 

Q: How does Vivint Solar’s Board of Directors recommend that I vote regarding the Merger Agreement?

A: After careful consideration, Vivint Solar’s board of directors unanimously recommends that Vivint Solar stockholders vote “FOR” the adoption of the Merger Agreement, and “FOR” the approval of the adjournment of

 

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the Special Meeting of Stockholders, if necessary, to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement at the time of the Special Meeting of Stockholders. For a description of the reasons underlying the recommendation of Vivint Solar’s board of directors, please see the section entitled “The Merger—Recommendation of Vivint Solar’s Board of Directors; Reasons for Vivint Solar’s Board of Directors’ Recommendation” beginning on page 75 of this proxy statement.

 

Q: Are there any other matters to be addressed at the Special Meeting of Stockholders?

A: We know of no other matters to be brought before the Special Meeting of Stockholders, but if other matters are brought before the Special Meeting of Stockholders or at any adjournment or postponement of the Special Meeting of Stockholders, the individuals named in your proxy will have the discretion to take such action as in their judgment is in the best interest of Vivint Solar and its stockholders.

 

Q. Who is entitled to vote at the Special Meeting of Stockholders?

A: All holders of issued and outstanding shares of Vivint Solar common stock who hold shares at the close of business on the “Record Date” (        ,         ) are entitled to receive notice of and to vote at the Special Meeting of Stockholders and any adjournment or postponement thereof provided that such shares remain outstanding on the date of the Special Meeting of Stockholders.

 

Q: How do I vote my shares at the Special Meeting of Stockholders?

A: If you are a registered stockholder, you may vote in person at the Special Meeting of Stockholders.

However, to ensure that your shares are represented at the Special Meeting of Stockholders, you are recommended to vote promptly by proxy by taking any of the following steps, even if you plan to attend the Special Meeting of Stockholders in person:

 

    By Internet: Go to the website specified on your proxy card and follow the instructions.

 

    By Telephone: Call the toll-free number specified on your proxy card from a touch-tone telephone in the United States or Canada and follow the instructions on your proxy card and the voice prompts on the telephone.

 

    By Mail: Mark your vote, sign and date your proxy card and return it in the pre-addressed postage-paid envelope provided. If you received more than one proxy card (which means that you have shares in more than one account), you must mark, sign, date and return each proxy card or use an alternative voting method. Any proxy card mailed must actually be received prior to the Special Meeting of Stockholders.

If you are not a registered stockholder, but instead hold your shares in “street name” through a bank, broker or other nominee, please follow the instructions provided to you by your bank, broker or other nominee to vote by proxy and ensure your shares are represented at the Special Meeting of Stockholders. If you want to vote in person at the Special Meeting of Stockholders, you must provide a proxy executed in your favor from your bank, broker or other nominee. For more information on how to vote your shares, please see the section titled “The Vivint Solar Special Meeting of Stockholders—Record Date and Voting” beginning on page 36.

 

Q: What happens if I do not vote or submit a proxy, or do not instruct my bank, broker or other nominee to vote, or abstain from voting?

A: If you fail to submit a proxy or attend the meeting in person, it will be more difficult for Vivint Solar to obtain the necessary quorum to hold the Special Meeting of Stockholders. In addition, your failure to submit a proxy or

 

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to vote in person, your failure to instruct your bank, broker or other nominee how to vote, or your abstention from voting, will have the same effect as a vote AGAINST the adoption of the Merger Agreement.

 

Q: What is the difference between holding shares as a stockholder of record and as a beneficial owner?

A: If your shares of Vivint Solar common stock are registered directly in your name with Computershare Trust Company, N.A., Vivint Solar’s transfer agent, you are considered the stockholder of record with respect to those shares. As the stockholder of record, you have the right to vote, or to grant a proxy for your vote directly to Vivint Solar or to a third party to vote, at the Special Meeting of Stockholders.

If your shares are held by a bank, brokerage firm or other nominee, you are considered the beneficial owner of shares held in “street name,” and your bank, brokerage firm or other nominee is considered the stockholder of record with respect to those shares. Your bank, brokerage firm or other nominee will send you, as the beneficial owner, a package describing the procedure for voting your shares. You should follow the instructions provided by them to vote your shares. You are invited to attend the Special Meeting of Stockholders, however, you may not vote these shares in person at the Special Meeting of Stockholders unless you obtain a “legal proxy” from your bank, brokerage firm or other nominee that holds your shares, giving you the right to vote the shares at the Special Meeting of Stockholders.

 

Q: What is a quorum, and what constitutes a quorum for the Special Meeting of Stockholders?

A: A quorum is the minimum number of shares required to be present at the Special Meeting of Stockholders for the meeting to be properly held under Vivint Solar’s amended and restated bylaws (the “Vivint Solar Bylaws”) and Delaware law. The presence, in person or by proxy, of a majority of all issued and outstanding shares of Vivint Solar common stock entitled to vote at the Special Meeting of Stockholders will constitute a quorum. A proxy submitted by a stockholder may indicate that all or a portion of the shares represented by the proxy are not being voted, which are referred to as stockholder withholding, with respect to a particular matter. Similarly, there may be a broker non-vote. The shares subject to a proxy that are not being voted on a particular matter because of either stockholder withholding or a broker non-vote will count for purposes of determining the presence of a quorum. Abstentions are also counted in the determination of a quorum.

 

Q: How many votes do I have?

A: Each Vivint Solar stockholder is entitled to one vote for each share of Vivint Solar common stock held of record as of the close of business on the Record Date. As of the close of business on the Record Date, there were                      outstanding shares of Vivint Solar common stock.

 

Q: What should I do if I want to change my vote?

A: If you submit your proxy through the Internet, by telephone or by mail, you may revoke your proxy at any time before the vote is taken at the Special Meeting of Stockholders in any one of the following ways:

 

    through the Internet or by telephone before the deadlines for voting described above;

 

    by submitting a later-dated proxy by mail that is actually received by the Vivint Solar Corporate Secretary prior to the Special Meeting of Stockholders (such later-dated proxy should be mailed to: Vivint Solar, Inc., Attention: Corporate Secretary, 3301 N. Thanksgiving Way, Suite 500, Lehi, Utah, 84043);

 

    by sending written notice of revocation to the Vivint Solar Corporate Secretary that is actually received by the Vivint Solar Corporate Secretary prior to the Special Meeting of Stockholders (written notice of revocation should be mailed to: Vivint Solar, Inc., Attention: Corporate Secretary, 3301 N. Thanksgiving Way, Suite 500, Lehi, Utah, 84043); or

 

    by voting in person at the Special Meeting of Stockholders.

 

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Your attendance at the Special Meeting of Stockholders does not automatically revoke your proxy. If you are not a registered stockholder, but instead hold your shares in “street name” through a bank, broker or other nominee, the above-described options for revoking your proxy do not apply. Instead, you will need to follow the instructions provided to you by your bank, broker or other nominee in order to revoke your proxy and submit new voting instructions.

 

Q: Is my vote confidential?

A: Proxy instructions, ballots, and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be publicly disclosed, except as necessary to meet applicable legal requirements, to allow for the tabulation of votes and certification of the vote or to facilitate a successful proxy solicitation.

 

Q: What happens if I sell my shares after the Record Date but before the Special Meeting of Stockholders?

A: The Record Date of the Special Meeting of Stockholders is earlier than the date of the Special Meeting of Stockholders and the date that the Merger is expected to be consummated. If you transfer your shares of Vivint Solar common stock after the Record Date but before the date of the Special Meeting of Stockholders, you will retain your right to vote at the Special Meeting of Stockholders (provided that such shares remain outstanding on the date of the Special Meeting of Stockholders), but you will not have the right to receive the Merger Consideration to be received by Vivint Solar stockholders in the Merger. In order to receive the Merger Consideration, you must hold your shares through the completion of the Merger.

 

Q: Who may attend the Special Meeting of Stockholders?

A: Vivint Solar stockholders as of the Record Date (or their authorized representatives) and invited guests of Vivint Solar may attend the Special Meeting of Stockholders. Verification of share ownership will be required at the meeting. If you own your shares in your own name or hold them through a broker (and can provide documentation showing ownership such as a letter from your broker or a recent account statement) at the close of business on the Record Date (        ,        ), you will be permitted to attend the Special Meeting of Stockholders. Stockholders may call the Vivint Solar corporate office at (877) 404-4129 to obtain directions to Vivint Solar’s corporate headquarters at 3301 N. Thanksgiving Way, Suite 500, Lehi, Utah, 84043.

 

Q: If a stockholder submits a proxy, how are the shares of Vivint Solar common stock voted?

A: Regardless of the method you choose to submit a proxy, the individuals named on the enclosed proxy card will vote your shares of Vivint Solar common stock in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your shares of Vivint Solar common stock should be voted for or against, or abstain from voting on, all, some or none of the specific items of business to come before the Special Meeting of Stockholders.

If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted: “FOR” the proposal to adopt the Merger Agreement, and “FOR” the approval of the adjournment of the Special Meeting of Stockholders, if necessary, to solicit additional proxies in favor of the adoption of the Merger Agreement.

 

Q: Will a proxy solicitor be used?

A: No. Vivint Solar has not retained a proxy solicitor to assist in the distribution and solicitation of proxies for the Special Meeting of Stockholders. However, Vivint Solar’s directors, officers and employees may solicit proxies in person or by telephone, e-mail, facsimile transmission or other means of communication, but no additional compensation will be paid to them.

 

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Q: What should I do if I receive more than one set of voting materials?

A: If you hold shares of Vivint Solar common stock in “street name” and also directly in your name as a stockholder of record or otherwise or if you hold shares of Vivint Solar common stock in more than one brokerage account, you may receive more than one set of voting materials relating to the Special Meeting of Stockholders. For shares of Vivint Solar common stock held directly, please complete, sign, date and return each proxy card (or submit your proxy by telephone or Internet as provided on each proxy card) or otherwise follow the voting instructions provided in this proxy statement in order to ensure that all of your shares of Vivint Solar common stock are voted. For shares of Vivint Solar common stock held in “street name” through a bank, brokerage firm or other nominee, you should follow the procedures provided by your bank, brokerage firm or other nominee to vote your shares.

 

Q: Whom should I call with questions?

A: You should call Robert Kain, Vivint Solar’s Vice President, Investor Relations, toll-free at (877) 404-4129 with any questions about the Merger and the other matters to be voted on at the Special Meeting of Stockholders, or to obtain additional copies of this proxy statement or additional proxy cards.

 

Q: What do I need to do now?

A: Even if you plan to attend the Special Meeting of Stockholders in person, after carefully reading and considering the information contained in this proxy statement, please submit a proxy promptly to ensure that your shares are represented at the Special Meeting of Stockholders. If you hold your shares of Vivint Solar common stock in your own name as the stockholder of record, you may submit a proxy to have your shares of Vivint Solar common stock voted at the Special Meeting of Stockholders in one of three ways:

 

    by telephone or over the Internet, by accessing the telephone number or Internet website specified on the enclosed proxy card. The control number provided on your proxy card is designed to verify your identity when voting by telephone or over the Internet. Please be aware that if you submit your proxy by telephone or over the Internet, you may incur costs such as telephone and Internet access charges for which you will be responsible;

 

    by completing, signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope; or

 

    in person—you may attend the Special Meeting of Stockholders and cast your vote there.

If you decide to attend the Special Meeting of Stockholders and vote in person, your vote by ballot will revoke any proxy previously submitted. Your attendance at the Special Meeting of Stockholders will not by itself revoke your proxy. If you are a beneficial owner (i.e., hold Vivint Solar common stock in “street name”), please refer to the instructions provided by your bank, brokerage firm or other nominee to see which of the above choices are available to you. Please note that if you are a beneficial owner and wish to vote in person at the Special Meeting of Stockholders, you must obtain a legal proxy from your bank, brokerage firm or other nominee.

 

Q: Where can I find the voting results of the Special Meeting of Stockholders?

A: The preliminary voting results will be announced at the Special Meeting of Stockholders. In addition, within four (4) business days following certification of the final voting results, Vivint Solar intends to file the final voting results with the SEC on a Current Report on Form 8-K.

 

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This proxy statement and the documents incorporated by reference herein may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Such forward-looking statements are not based on historical facts but instead reflect SunEdison’s and Vivint Solar’s expectations, estimates or projections concerning future results or events. These statements generally can be identified by the use of forward-looking words or phrases such as “expect,” “anticipate,” “believe,” “intend,” “plan,” “seek,” “estimate,” “predict,” “project,” “goal,” “guidance,” “outlook,” “objective,” “forecast,” “target,” “potential,” “continue,” “would,” “will,” “should,” “could,” or “may” or other comparable terms and phrases. These statements are not guarantees of performance and are inherently subject to known and unknown risks, uncertainties and assumptions that are difficult to predict and could cause SunEdison’s and Vivint Solar’s actual results, performance or achievements to differ materially from those expressed in or indicated by those statements. SunEdison and Vivint Solar cannot assure you that any of their expectations, estimates or projections will be achieved. Forward-looking statements speak only as of the date they were made. SunEdison and Vivint Solar undertake no obligation to update or revise forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events or new information, other than as required by law. Although SunEdison and Vivint Solar believe that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect their actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause or contribute to differences in SunEdison’s and Vivint Solar’s future financial results include those discussed elsewhere in this proxy statement or in the documents that are incorporated by reference into this proxy statement, attached hereto as Annexes or filed as exhibits hereto. Specific factors that could cause actual results to differ from those in the forward-looking statements include, among others:

 

    SunEdison’s ability to achieve the anticipated benefits in connection with the Merger or the other acquisitions and investments described in the section entitled “Business—Recent Events”;

 

    the challenges and costs of the Merger, integrating Vivint Solar’s operations with those of SunEdison, and achieving anticipated synergies, including the ability to achieve targeted cost savings or revenue growth;

 

    any change, effect, event, occurrence, development, matter, state of facts, series of events or circumstances that could give rise to the termination of the Merger Agreement, including a termination of the Merger Agreement under circumstances that could require Vivint Solar to pay a termination fee to SunEdison;

 

    limitations placed on the ability of Vivint Solar to operate its business by the Merger Agreement and the limitations put on Vivint Solar’s ability to pursue alternatives to the Merger pursuant to the Merger Agreement;

 

    the price of, market for and potential market price volatility of SunEdison common stock;

 

    the failure of conditions to the consummation of the Merger to be satisfied, including failure of Vivint Solar stockholders to adopt the Merger Agreement, or failure to receive required regulatory or stock exchange approvals;

 

    the failure of the Merger to close on time or at all for any other reason;

 

    the outcome and ultimate impact of any legal proceedings, including any that have been or may be instituted against SunEdison, Vivint Solar, TerraForm Power, 313, their respective officers and directors or others in connection with the Merger;

 

    SunEdison’s ability to access funding for the Merger, including in order to pay the Cash Consideration, and the other acquisitions and investments described in SunEdison’s other filings with the SEC that are incorporated by reference herein;

 

   

SunEdison’s substantial indebtedness, and the requirements of and its compliance with the terms governing its indebtedness, which could make SunEdison vulnerable to general adverse economic and

 

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industry conditions, limit its ability to borrow additional funds, and/or place it at competitive disadvantages compared to its competitors that have less debt;

 

    SunEdison’s and Vivint Solar’s abilities to compete effectively in and further penetrate the markets they serve, and Vivint Solar’s ability to expand into new markets and expand into markets for nonresidential solar energy systems, such as the commercial and industrial market;

 

    changes in law or regulations applicable to SunEdison’s or Vivint Solar’s business;

 

    changes in SunEdison’s or Vivint Solar’s businesses, anticipated growth, future cash requirements, capital requirements, results of operations, revenues, funding, financial condition and/or cash flows; market conditions and factors that affect customer demand;

 

    Vivint Solar’s and SunEdison’s abilities to maintain their brand and protect their intellectual property;

 

    the factors described under the section entitled “Cautionary Statement Regarding Forward-Looking Statements” in SunEdison’s Annual Report on Form 10-K for the year ended December 31, 2014 and the section entitled “Forward-looking Statements” in Vivint Solar’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014; and

 

    the other economic, business, competitive and/or regulatory factors affecting the businesses of SunEdison and Vivint Solar described in SunEdison’s and Vivint Solar’s other filings with the SEC that are incorporated by reference herein.

There may be other factors that may cause SunEdison’s and Vivint Solar’s actual results to differ materially from the forward-looking statements. Stockholders should understand that it is not possible to predict or identify all such factors and, consequently, should not consider any such list to be a complete set of all potential risks or uncertainties. SunEdison’s and Vivint Solar’s actual results, performance or achievements could differ materially from those expressed in or implied by the forward-looking statements. SunEdison and Vivint Solar can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them does, what impact such events will have on the results of operations and financial condition of SunEdison and Vivint Solar. You should carefully read the factors described in the “Risk Factors” section of the documents incorporated by reference into this proxy statement for a description of certain risks that could, among other things, cause actual results to differ from the forward-looking statements.

 

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THE VIVINT SOLAR SPECIAL MEETING OF STOCKHOLDERS

Proxy statement

This proxy statement is being furnished to Vivint Solar stockholders in connection with the solicitation of proxies by Vivint Solar’s board of directors in connection with the Special Meeting of Stockholders.

This proxy statement and the enclosed proxy card are first being sent to Vivint Solar stockholders on or about                      , 2016.

Date, Time and Place of the Special Meeting of Stockholders

The Special Meeting of Stockholders is to be held at          , local time, on          ,          , 2016, at 3301 N. Thanksgiving Way, Suite 500, Lehi, Utah 84043.

Purpose of the Special Meeting of Stockholders

At the Special Meeting of Stockholders, holders of Vivint Solar common stock as of the Record Date will be asked to:

Proposal 1. consider and vote upon the adoption of the Merger Agreement; and

Proposal 2. consider and vote upon the approval of the adjournment of the Special Meeting of Stockholders, if necessary, to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement at the time of the Special Meeting of Stockholders.

Record Date and Voting

Only holders of record of Vivint Solar common stock at the close of business on          ,          , which is the Record Date, will be entitled to notice of and to vote at the Special Meeting of Stockholders with regard to Proposals 1 and 2 described above. On the Record Date, there were                  shares of Vivint Solar common stock outstanding and entitled to vote at the Special Meeting of Stockholders, held by approximately          holders of record. Each share of Vivint Solar common stock issued and outstanding on the Record Date is entitled to one vote on each proposal to be voted upon at the Special Meeting of Stockholders.

The quorum requirement for holding the Special Meeting of Stockholders and transacting business at the Special Meeting of Stockholders is the presence, in person or by proxy, of a majority of the issued and outstanding shares of Vivint Solar common stock as of the Record Date entitled to vote at the Special Meeting of Stockholders (other than with respect to Proposal 2, the proposal related to adjournments, for which a quorum is not required). The shares may be present in person or represented by proxy at the Special Meeting of Stockholders.

If your proxy card is properly executed and received by Vivint Solar in time to be voted at the Special Meeting of Stockholders, the shares of Vivint Solar common stock represented by your proxy (including those given electronically via the Internet or by telephone) will be voted in accordance with the instructions that you mark on your proxy card. Executed but unvoted proxies will be voted in accordance with the recommendations of Vivint Solar’s board of directors.

Vote Required

Adoption of Merger Agreement (Proposal 1). The affirmative vote of the holders of at least a majority of the outstanding shares of Vivint Solar common stock entitled to vote thereon is required to adopt the Merger Agreement. The required vote of Vivint Solar stockholders on the Merger Agreement is based upon the number of outstanding shares of Vivint Solar common stock entitled to vote thereon and not the number of shares that are

 

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actually voted. Brokers, banks and other nominees do not have discretionary authority to vote on this proposal. The failure to submit a proxy card or to vote electronically via the Internet, by telephone or in person at the Special Meeting of Stockholders of any Vivint Solar stockholder or the abstention from voting by any Vivint Solar stockholder will have the same effect as a vote against the adoption of the Merger Agreement by such Vivint Solar stockholder. The failure of any Vivint Solar stockholder who holds shares in “street name” through a broker, bank or other nominee to give instructions to such broker, bank or other nominee (a “broker non-vote”) will also have the same effect as a vote against this proposal.

Approval of the Adjournment of the Special Meeting of Stockholders (Proposal 2). The affirmative vote of a majority of the holders of Vivint Solar common stock present in person or represented by proxy at the Special Meeting of Stockholders is required to approve the proposal to adjourn the Special Meeting of Stockholders, if necessary, to solicit additional proxies if there are insufficient votes at the time of the Special Meeting of Stockholders to adopt the Merger Agreement. The required vote of holders of Vivint Solar common stock to approve the proposal to adjourn the Special Meeting of Stockholders, if necessary, to solicit additional proxies is based on the number of shares that are present in person or represented by proxy, not on the number of outstanding shares of Vivint Solar common stock. Brokers, banks and other nominees do not have discretionary authority to vote on this proposal. The failure to submit a proxy card or to vote electronically via the Internet, by telephone or in person at the Special Meeting of Stockholders or a broker non-vote, will have no effect on this proposal. Abstentions from voting by any Vivint Solar stockholder will have the same effect as a vote against this proposal. In accordance with the Vivint Solar Bylaws, a vote to approve the proposal to adjourn the Special Meeting of Stockholders, if necessary, to solicit additional proxies if there are insufficient votes at the time of the Special Meeting of Stockholders to adopt the Merger Agreement may be taken in the absence of a quorum. Vivint Solar does not intend to call a vote on this proposal if Proposal 1 has been approved at the Special Meeting of Stockholders.

Recommendation of Vivint Solar’s Board of Directors

The Vivint Solar board of directors unanimously resolved to recommend:

1. “FOR” the adoption of the Merger Agreement (Proposal 1); and

2. “FOR” the approval of the adjournment of the Special Meeting of Stockholders, if necessary, to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement at the time of the Special Meeting of Stockholders (Proposal 2).

Vivint Solar stockholders should carefully read this proxy statement in its entirety for more detailed information concerning the Merger Agreement and the Merger. In particular, Vivint Solar stockholders are directed to the Merger Agreement and the Merger Agreement Amendment, which are attached as Annex A and Annex B hereto and are incorporated by reference herein.

Voting Electronically or by Telephone

If your shares of Vivint Solar common stock are registered directly in your name with Vivint Solar’s transfer agent, you are considered, with respect to those shares, the “stockholder of record,” and these proxy materials are being sent to you directly by Vivint Solar. As a stockholder of record, you have the right to grant your voting proxy directly to the persons named as proxy holders, Gregory S. Butterfield and Shawn J. Lindquist, or to vote in person at the Special Meeting of Stockholders. A proxy card has been enclosed for you to use. You may also vote electronically via the Internet or by telephone.

If your shares of Vivint Solar common stock are held by a broker, bank or other nominee, you are considered the beneficial owner of the shares held in “street name” and these proxy materials are being forwarded to you by your broker, bank or other nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or other nominee

 

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on how to vote your shares and are also invited to attend the Special Meeting of Stockholders. However, since you are not the stockholder of record, you may not vote these shares in person at the Special Meeting of Stockholders. Your broker, bank or other nominee has enclosed a voting instruction card for you to use in directing your broker, bank or other nominee as to how to vote your shares. You may also vote electronically via the Internet or by telephone.

You can ensure your shares of Vivint Solar common stock are represented at the Special Meeting of Stockholders by promptly submitting your proxy electronically via the Internet or by telephone or marking, signing, dating and returning the appropriate proxy card in the envelope provided. Each valid proxy received in time will be voted at the Special Meeting of Stockholders according to the choice specified, if any. A proxy may be revoked at any time before the proxy is voted, as outlined below.

Vote of Vivint Solar’s Executive Officers

As of the Record Date, Vivint Solar’s executive officers and directors, and their affiliates, as a group, owned and were entitled to vote              shares of Vivint Solar common stock, or approximately      % of the total outstanding shares of Vivint Solar common stock. Vivint Solar currently expects that its executive officers and directors will vote their shares in favor of Proposals 1 and 2, but none of Vivint Solar’s executive officers or directors have entered into any agreement obligating them to do so.

Revocability of Proxies

You may revoke a proxy or change your voting instructions at any time prior to the vote at the Special Meeting of Stockholders. You may enter a new vote electronically via the Internet or by telephone or by mailing a new proxy card or new voting instruction card bearing a later date (which will automatically revoke your earlier voting instructions) or by attending the Special Meeting of Stockholders and voting in person. Your attendance at the Special Meeting of Stockholders in person will not cause your previously granted proxy to be revoked unless you specifically so request. You may deliver written notice of revocation of a proxy to Vivint Solar’s Corporate Secretary at any time before the Special Meeting of Stockholders by sending such revocation to the Corporate Secretary, 3301 N. Thanksgiving Way, Suite 500, Lehi, Utah 84043, in time for the Corporate Secretary to receive it before the Special Meeting of Stockholders.

Inspector of Election

A representative of Vivint Solar’s legal department will tabulate the vote and act as the inspector of election at the Special Meeting of Stockholders.

Attending the Special Meeting of Stockholders

You are entitled to attend the Special Meeting of Stockholders only if you are a stockholder of record of Vivint Solar or you hold your shares of Vivint Solar beneficially in the name of a broker, bank or other nominee as of the Record Date, or you hold a valid proxy for the Special Meeting of Stockholders.

If you are a stockholder of record of Vivint Solar and wish to attend the Special Meeting of Stockholders, please so indicate on the appropriate proxy card or as prompted by the Internet or telephone voting system. Your name will be verified against the list of stockholders of record prior to your being admitted to the Special Meeting of Stockholders.

If a broker, bank or other nominee is the record owner of your shares of Vivint Solar common stock, you will need to have proof that you are the beneficial owner as of the Record Date to be admitted to the Special Meeting of Stockholders. A recent statement or letter from your broker, bank or other nominee confirming your

 

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ownership as of the Record Date, or presentation of a valid proxy from a broker, bank or other nominee that is the record owner of your shares, would be acceptable proof of your beneficial ownership.

You should be prepared to present photo identification for admittance. If you do not provide photo identification or comply with the other procedures outlined above upon request, you may not be admitted to the Special Meeting of Stockholders.

Voting Procedures

You may vote your shares of Vivint Solar common stock by proxy electronically via the Internet, by telephone or by completing and sending in the appropriate paper proxy card or in person at the Special Meeting of Stockholders.

Whether you vote your proxy electronically via the Internet, by telephone or by mail or in person, Vivint Solar will treat your proxy the same way. The individuals appointed as proxyholders will be Gregory S. Butterfield and Shawn J. Lindquist. The shares of Vivint Solar common stock represented by valid proxies that are received in time for the Special Meeting of Stockholders will be voted as specified in such proxies. Valid proxies include all properly executed, written paper proxy cards received pursuant to this solicitation that are not later revoked. Executed proxies submitted without direction pursuant to this solicitation will be voted “FOR” each of Proposals 1 and 2.

Proxy Solicitations

Vivint Solar is soliciting proxies for the Special Meeting of Stockholders from Vivint Solar stockholders. Vivint Solar will bear the cost of the solicitation. Vivint Solar will reimburse brokers, banks, institutions and others holding common stock of Vivint Solar as nominees for their expenses in sending proxy solicitation material to the beneficial owners of such common stock of Vivint Solar and obtaining their proxies.

Stockholders should not send stock certificates or other evidence of shares in book-entry form with their proxies. A letter of transmittal and instructions for the surrender of Vivint Solar stock certificates will be mailed to Vivint Solar stockholders shortly after the completion of the Merger, if approved and completed.

If you need assistance in completing your proxy card or have questions regarding the Special Meeting of Stockholders, please contact Robert Kain, Vivint Solar’s Vice President, Investor Relations, toll-free at (877)  404-4129.

Householding

Some brokers, banks and other nominees may be participating in the practice of “householding” proxy statements. This means that only one copy of this proxy statement may have been sent to multiple stockholders in your household. Vivint Solar will promptly deliver a separate copy of this proxy statement to you if you write or call Vivint Solar at the following address or telephone number: 3301 N. Thanksgiving Way, Suite 500 Lehi, Utah 84043, Attn: Investor Relations, (877) 404-4129 (toll-free).

 

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PROPOSAL 1: THE MERGER

SunEdison and Vivint Solar have agreed to the business combination of SunEdison and Vivint Solar pursuant to the Merger Agreement that is described in this proxy statement. In the Merger, Merger Sub, a wholly owned subsidiary of SunEdison, will merge with and into Vivint Solar, with Vivint Solar surviving as a wholly owned subsidiary of SunEdison. The Merger Agreement and the Merger Agreement Amendment are attached as Annex A and Annex B, respectively, to this proxy statement and are incorporated by reference herein. Vivint Solar encourages you to read carefully the Merger Agreement and the Merger Agreement Amendment in their entirety, because they are the legal documents that govern the Merger.

For a detailed discussion of the terms and conditions of the Merger, see the section entitled “The Merger Agreement” beginning on page 130. As discussed in the section entitled “The Merger—Recommendation of Vivint Solar’s Board of Directors; Reasons for Vivint Solar’s Board of Directors’ Recommendation” beginning on page 75, Vivint Solar’s board of directors has determined that the Merger and the Merger Agreement are advisable and in the best interests of Vivint Solar and its stockholders and approved the Merger Agreement and the Merger. Vivint Solar is asking its stockholders to adopt the Merger Agreement. The adoption of the Merger Agreement by Vivint Solar stockholders is required to effect the consummation of the Merger.

Vivint Solar’s board of directors recommends that the stockholders of Vivint Solar vote “FOR” the adoption of the Merger Agreement.

 

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THE MERGER

General

Each of Vivint Solar’s and SunEdison’s boards of directors has unanimously approved and declared advisable the Merger Agreement and the Merger.

Under the terms of the Merger Agreement, Merger Sub, a wholly owned subsidiary of SunEdison, will merge with and into Vivint Solar, with Vivint Solar surviving as a wholly owned subsidiary of SunEdison. At the Effective Time and as a result of the Merger, each share of Vivint Solar common stock will be converted into the right to receive the Merger Consideration on the terms provided in the Merger Agreement and as further described below in the section entitled “The Merger Agreement—The Merger Consideration” beginning on page 131.

Background of the Merger

In the ordinary course of business, the senior management and board of directors of Vivint Solar review and assess various strategies that may enhance stockholder value.

On March 6, 2015, Greg Butterfield, the president and chief executive officer of Vivint Solar, and Carlos Domenech, executive vice president of SunEdison and the president and chief executive officer of TerraForm Power, a controlled affiliate of SunEdison, had a telephone conversation to exchange ideas about the industry in which the companies operate, for SunEdison and TerraForm Power to learn more about Vivint Solar’s business, and for Vivint Solar to learn more about SunEdison’s and TerraForm Power’s business. During the conversation, Messrs. Butterfield and Domenech discussed potential business and other partnership opportunities between the parties. Toward the end of the call, Mr. Domenech raised the possibility of a strategic combination between SunEdison and Vivint Solar as a potential alternative, but the possibility was not discussed in detail. At the conclusion of the call, Messrs. Butterfield and Domenech agreed to speak again to continue the dialogue regarding potential opportunities among the companies.

On March 26, 2015, Messrs. Butterfield and Domenech, along with Todd Cater, vice president of North America mergers & acquisitions of SunEdison, and Kevin Lapidus, the senior vice president of corporate development of SunEdison and TerraForm Power, met at the principal executive offices of TerraForm Power in Bethesda, Maryland. During the meeting, the parties discussed the industry in which Vivint Solar operates, and the representatives of SunEdison indicated that SunEdison was considering multiple strategic opportunities to increase its presence in the industry and wanted to further learn about Vivint Solar’s business.

Also on that same day, in order to facilitate further discussion between the parties, Mr. Cater emailed a draft mutual nondisclosure agreement between TerraForm Power and Vivint Solar to Mr. Butterfield.

On March 31, 2015, Mr. Cater emailed Mr. Butterfield with select diligence requests.

On April 6, 2015, Vivint Solar’s board of directors (as referenced in this Section, the “Board”) held a regularly scheduled meeting with representatives of Vivint Solar’s management and Wilson Sonsini Goodrich & Rosati, P.C. (“Wilson Sonsini”), outside counsel to Vivint Solar, in attendance. At the meeting, Mr. Dana Russell, Vivint Solar’s chief financial officer, provided the Board with an update on Vivint Solar’s current financial performance including Vivint Solar’s projected funding needs. In particular, Mr. Russell discussed that Vivint Solar’s projected cash balances were anticipated to be sufficient to fund operations until late 2015, but that Vivint Solar would need to consummate a substantial financing in order to continue to operate and grow Vivint Solar’s business from that point onwards. The Board discussed the importance of beginning in the near term preparations for such financing, so that Vivint Solar would have sufficient capital in place by year end. Mr. Butterfield then provided an update on recent discussions with SunEdison and TerraForm Power, and the

 

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Board directed Vivint Solar’s senior management to enter into a nondisclosure agreement with TerraForm Power and to participate in TerraForm Power’s preliminary due diligence on Vivint Solar.

On that same day, Vivint Solar entered into a mutual non-disclosure agreement with TerraForm Power.

Over the course of the following week, Mr. Russell responded to select diligence requests from TerraForm Power and participated in preliminary diligence related activities.

On April 9, 10 and 20, 2015, Mr. Russell (joined by Messrs. Butterfield and Shawn J. Lindquist, chief legal officer, executive vice president and secretary of Vivint Solar, for certain meetings) participated in preliminary discussions with investment banks regarding Vivint Solar’s financing needs, potential financing strategies to continue to fund Vivint Solar’s operations and timetables for these strategies. During the meetings, the investment banks shared their initial guidance that if Vivint Solar engaged in an offering of its common stock, the price per share would need to be at a discount to Vivint Solar’s trading price at the time of such offering. During this April 9 to April 20 period, Vivint Solar’s common stock traded in the range of $12.23 to $14.32.

On May 6, 2015, the Board held a regularly scheduled meeting with representatives of Vivint Solar’s management and Wilson Sonsini in attendance. At the meeting, Mr. Russell updated the Board on the cash balances and operating costs of Vivint Solar. Messrs. Butterfield and Russell also updated the Board regarding the significant projected financing needs of Vivint Solar including the need of Vivint Solar to consummate prior to late 2015 a substantial financing that would be necessary to fund the continued operation and growth of Vivint Solar. Messrs. Butterfield and Russell then updated the Board regarding the preliminary discussions with investment banking firms with respect to potential financing alternatives, including the types of security or securities that might be offered, the amount of desired proceeds and the potential timetable for each alternative. The Board noted the potential risks of deferring the financing to later in 2015, including that fluctuations in market conditions could negatively impact or delay the timing of the financing. Accordingly, the Board discussed the importance of beginning preparations for the financing in the near term to ensure that, by late 2015, Vivint Solar would have sufficient capital available to fund the operations and continued growth of Vivint Solar. TerraForm Power and SunEdison were not discussed at the meeting.

On May 14, 2015, Messrs. Domenech and Butterfield had a telephone conversation during which Mr. Domenech indicated that SunEdison and TerraForm Power were continuing to review their strategic alternatives to drive growth of both the project development and operating portfolio businesses and that Mr. Domenech wanted to introduce Mr. Butterfield to Ahmad Chatila, the president and chief executive officer of SunEdison. Following that conversation, Mr. Domenech introduced Messrs. Butterfield and Chatila by email and proposed a potential in-person meeting.

On May 15, 2015, Messrs. Chatila and Butterfield had a telephone conversation and arranged for Mr. Chatila to visit Vivint Solar’s corporate offices in Lehi, Utah on May 19, 2015.

On May 19, 2015, Messrs. Butterfield and Chatila met at Vivint Solar’s corporate offices in Lehi, Utah. During this meeting, Mr. Chatila advised Mr. Butterfield that SunEdison was interested in pursuing a potential acquisition of Vivint Solar, and that Mr. Chatila would propose to the board of directors of SunEdison that SunEdison deliver an offer letter to acquire Vivint Solar. Mr. Chatila did not provide Mr. Butterfield with any of the proposed terms, including price, that SunEdison planned to include in the offer letter.

In the following days, Mr. Butterfield updated Mr. Peter Wallace, the chairman of the Board, on his discussions with Mr. Chatila as part of the regularly scheduled update calls and recommended that Mr. Wallace meet with representatives of SunEdison.

On June 1, 2015, Mr. Domenech and Alex Hernandez, an officer of TerraForm Power, had an introductory meeting with Mr. Wallace in which Mr. Domenech shared SunEdison’s strategic rationale for a possible strategic

 

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transaction with Vivint Solar. Mr. Domenech advised Mr. Wallace that SunEdison would be delivering to Vivint Solar an offer letter in the coming days, but he did not give an indication as to the price or other terms of the proposed transaction.

On June 3, 2015, SunEdison delivered to Vivint Solar a non-binding offer letter to acquire Vivint Solar. The letter provided for a price of $17.50 per share and indicated that the amount would be paid to stockholders through a combination of approximately $1.443 billion in cash and $400 million in common stock of SunEdison (which amounts were based on SunEdison’s understanding of Vivint Solar’s capitalization at the time), which price represented approximately a 25% premium over Vivint Solar’s closing price of $13.99 on June 2, 2015 and a 22% premium to Vivint Solar’s average closing price over the prior 30 trading days. The letter of intent also indicated that SunEdison was contemplating providing public stockholders not including 313 with the option to receive 100% of their merger consideration in cash. In conjunction with delivering the offer letter and discussions around the terms thereof, Vivint Solar and SunEdison discussed the need for SunEdison to finance the acquisition and during such discussions, SunEdison representatives expressed confidence in SunEdison’s ability to obtain needed financing for the transaction. SunEdison also delivered to Vivint Solar a draft confidentiality agreement to supersede the mutual nondisclosure agreement executed by TerraForm Power and Vivint Solar on April 6, 2015. The new confidentiality agreement provided for a six week exclusivity period, and SunEdison indicated that its offer was subject to Vivint Solar agreeing to the exclusivity period.

On that same day, Mr. Domenech had a call with Mr. Butterfield to review the terms of the offer letter.

On June 4, 2015, the Board held a regularly scheduled meeting. At the invitation of the Board, representatives of Vivint Solar’s management and Wilson Sonsini attended the meeting. During the meeting, management of Vivint Solar provided a financial update to the Board, including with respect to the cost per watt for installing and operating residential solar energy systems during the second quarter of Vivint Solar’s fiscal year and the anticipated substantial need of Vivint Solar to raise additional capital to continue to operate and grow its business. The Board discussed how funds generated from tax equity (which are structured investments that monetize federal tax credits) would likely not be enough to fully finance the planned continued near-term growth of the business and that Vivint Solar would need to raise significant amounts of additional capital prior to the end of 2015 in order to fund operations. The Board also discussed the competitive climate in Vivint Solar’s industry, as well as competition for raising tax equity and other investment capital. Based in part on recent discussions with investment banks, the Board further discussed the challenges it would face in obtaining equity and equity-backed financing given current market conditions, and that the price per share at which Vivint Solar could sell its common stock would likely be less than the price per share paid in Vivint Solar’s initial public offering.

Following this discussion, the Board considered the terms of SunEdison’s offer. The Board considered whether to approach third parties and the timing and likelihood of a third party being able to make an attractive proposal to acquire Vivint Solar. During the meeting, the Board also noted the importance of speed of execution and deal certainty. In particular, the Board considered that, if Vivint Solar were to remain a standalone entity, it would need to begin preparations in the near term so that it could consummate a financing in the upcoming months, and no later than the end of 2015, in order to allow it to fund its operations and continued growth. Accordingly, in evaluating the SunEdison proposal the Board considered the importance of speed of execution to ensure that Vivint Solar would still be able to consummate a financing on that timetable if Vivint Solar were unable, relatively quickly, to enter into a merger agreement with SunEdison on satisfactory terms. Deal certainty was also critical as the Board appreciated that the equity capital markets could become more volatile or otherwise not be receptive to a financing transaction. During such discussions, the Board determined that it would consider proceeding with a transaction with SunEdison if the purchase price reflected, in the judgment of the Board, a sufficient premium to Vivint Solar’s current share price and Vivint Solar’s initial public offering price. Following discussion, the Board instructed Mr. Wallace to inform SunEdison that to continue discussions regarding a potential acquisition and to enter into exclusivity, Vivint Solar would require an increase to the proposed purchase price, and the Board authorized Mr. Wallace to propose a purchase price of $19.00 per share, which

 

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price represented a 34% premium over Vivint Solar’s closing price of $14.17 on June 3, 2015. The Board also determined that it would require a shorter exclusivity period and instructed Messrs. Wallace and Butterfield to emphasize to the representatives of SunEdison the importance of deal certainty and speed of execution.

Following this meeting, Mr. Wallace conveyed to Mr. Domenech that the Board would require a higher purchase price, but Mr. Wallace did not propose a specific price. Mr. Wallace also conveyed the need for a shorter exclusivity period and conveyed the importance of deal certainty and speed of execution.

On June 5, 2015, Messrs. Domenech and Wallace had a telephone conversation, where Mr. Domenech indicated that SunEdison was willing to increase its price to $18.37 per share and reduce the proposed exclusivity period from six weeks to four weeks. At this point, Mr. Wallace proposed a purchase price of $19.00 per share. Mr. Domenech indicated that SunEdison would consider the proposed purchase price and asked that Vivint Solar provide additional diligence information regarding Vivint Solar’s capitalization.

Following the call, Mr. Wallace introduced Messrs. Lapidus and Domenech to Mr. Lindquist for the purpose of allowing SunEdison to conduct additional diligence regarding the capitalization of Vivint Solar.

On June 6, 2015, Messrs. Butterfield and Domenech had a call during which Mr. Domenech indicated that SunEdison would be delivering a revised offer letter, which would reflect its best and final offer. Mr. Butterfield subsequently relayed this conversation to Mr. Wallace, who then spoke to Mr. Domenech. During the call between Messrs. Wallace and Domenech, Mr. Domenech indicated that SunEdison would raise its price to $18.68 per share.

Later that day, SunEdison delivered to Vivint Solar a revised non-binding written offer letter to acquire Vivint Solar at an increased aggregate price of $18.68 per share, comprised of $15.25 per share in cash and $3.43 per share in stock. The price represented approximately a 33% premium over Vivint Solar’s closing price of $14.08 on June 5, 2015 and a 30% premium to Vivint Solar’s average closing price over the prior 30 trading days. In conjunction with the offer letter, SunEdison reiterated its request that Vivint Solar enter into a confidentiality agreement that contained a provision requiring Vivint Solar to negotiate exclusively with SunEdison for a period of four weeks. In conjunction with the delivery of these documents, Mr. Domenech discussed SunEdison’s recent record of executing and completing transactions on an expedited timeline and re-expressed his confidence in SunEdison’s ability to obtain needed financing for the transaction.

On June 7, 2015, the Board held a meeting to discuss the transaction proposed by SunEdison. At the invitation of the Board, representatives of Vivint Solar’s management and Wilson Sonsini also attended the meeting. At the meeting, the Board reviewed the terms of the revised offer letter received from SunEdison, and representatives of management informed the Board that SunEdison had indicated that this was its best and final offer. A representative of Wilson Sonsini then reviewed the fiduciary duties of the Board in connection with a potential acquisition of Vivint Solar. The Board discussed whether any strategic or financial acquiror would have the interest or the ability to conduct due diligence on Vivint Solar in a timely manner and make an attractive bid to acquire Vivint Solar as compared to the transaction proposed by SunEdison. The Board also discussed the challenges in approaching a competitor regarding a potential transaction, particularly given the highly competitive industry in which Vivint Solar operates, the risk of a competitor leaking the potential sale and how any leak could have significant negative effects on Vivint Solar’s business. Following discussion, the Board determined not to approach other possible acquirors because the Board believed that potential acquirors would likely not be interested in a transaction on the timeline necessary to maintain the availability of SunEdison’s offer or at a higher price and that a delay to the transaction could imperil the likelihood of consummating a transaction with SunEdison, especially on a timeline that would permit Vivint Solar to maintain flexibility with respect to its financing alternatives. During the meeting, the Board also considered the state of Vivint Solar’s business, including the increased competition in the industry. The Board further discussed the standalone business of Vivint Solar, the need for Vivint Solar to obtain significant financing prior to the end of the year and the challenges Vivint Solar would face in raising additional capital through the public stock markets, particularly in

 

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light of the recent trading price of Vivint Solar which was below the price of Vivint Solar’s initial public offering. The Board also discussed the need to begin preparations for raising additional capital in the near term if the Board determined that Vivint Solar should remain a standalone business. The Board considered whether the speed of execution and deal certainty indicated by SunEdison’s offer and discussion with SunEdison management were sufficient given that the Board wished to ensure that if Vivint Solar was not able to enter into a merger agreement with SunEdison relatively quickly and on satisfactory terms, it would still have sufficient time to begin preparations to raise the additional capital needed to satisfy its operating and growth requirements, as discussed above. Following further discussion, the Board authorized management to enter into a confidentiality agreement with SunEdison containing a four week exclusivity period. The Board also discussed the retention of a financial advisor in connection with the proposed transaction, particularly one with relevant industry experience. The Board discussed certain investment banks which were active in the broader solar energy marketplace and had worked with many of the companies engaged in that space, including Vivint Solar, its competitors and SunEdison and its affiliates. After discussion, the Board authorized Messrs. Wallace and Butterfield to engage Morgan Stanley as a financial advisor to the Board.

On June 8, 2015, SunEdison and Vivint Solar entered into a confidentiality agreement, which provided for an exclusivity period ending at 11:59 p.m. Eastern Time on July 5, 2015 during which Vivint Solar would not be permitted to engage in discussions regarding an acquisition of Vivint Solar with parties other than SunEdison.

On this same day, Vivint Solar provided SunEdison and its advisors access to an electronic data room to enable SunEdison to conduct a due diligence investigation of Vivint Solar.

From June 9 through June 11, 2015, Vivint Solar’s senior management hosted in-person due diligence meetings in Salt Lake City, Utah, which were attended by employees and advisors of SunEdison. In addition, on June 9, 2015, Mr. Wallace advised the Board by email that he had become aware that an affiliate of The Blackstone Group L.P. (together with its affiliates, other than portfolio companies, and 313, collectively “Blackstone”) had an investment in certain assets controlled by SunEdison that involved renewable assets in emerging markets. Mr. Wallace indicated that he did not believe this investment would derive any benefit from the proposed acquisition of Vivint Solar by SunEdison and also stated that he did not believe this investment represented a conflict of interest. (Blackstone, through private equity funds sponsored by it which are different than the affiliated vehicle that made this investment, is the majority owner of 313, which is the controlling stockholder in Vivint Solar.)

On June 10, 2015, Messrs. Butterfield and Wallace had a call with a representative of Morgan Stanley to discuss the potential transaction between SunEdison and Vivint Solar. During the call, Messrs. Butterfield and Wallace indicated that the Board had requested that Morgan Stanley advise Vivint Solar in connection with the transaction.

During the following week, representatives of Vivint Solar, SunEdison, Wilson Sonsini and Morgan Stanley had calls to discuss matters relating to the transaction and participated in due diligence discussions.

On June 14, 2015, SunEdison delivered to Vivint Solar a slide deck showing alternative structures for the proposed transaction, each of which contemplated that certain assets of Vivint Solar would be transferred (either before or after the proposed acquisition of Vivint Solar by SunEdison) to TerraForm Power.

On June 15, 2015, representatives of SunEdison and Vivint Solar had a call to discuss SunEdison’s proposed alternative transaction structures. During the call, a representative of SunEdison indicated that the proposed pre-closing asset transfer would result in additional taxes, which would possibly require a reduction in the purchase price.

Later that day, Messrs. Wallace and Domenech had a call to discuss the proposed alternative structures that SunEdison had proposed on June 14. Mr. Wallace articulated concerns about the proposed asset based structure

 

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and potential price reduction due to additional taxes and Vivint Solar’s strong preference to structure the transaction as a merger without the asset sale components introduced by SunEdison.

On June 16, 2015, representatives of Kirkland & Ellis LLP (“Kirkland & Ellis”), counsel to SunEdison, delivered a first draft of a merger agreement to Wilson Sonsini, which provided that Vivint Solar would be acquired through a merger, and did not provide for any asset transfers as had been discussed over the course of the prior two days. Representatives of the companies, together with their counsel, engaged in a series of meetings and conference calls over the next several weeks to negotiate the terms of the merger agreement and related agreements.

On that same date, representatives of Morgan Stanley delivered several reverse due diligence requests by email to members of SunEdison management, including a request for SunEdison financial projections. Later in the day, the representatives of Morgan Stanley and management of SunEdison discussed the requests by telephone.

Over the course of the following days, representatives of Vivint Solar and SunEdison participated in telephonic conference calls pertaining to due diligence and other related matters.

On June 19, 2015, the Board held a meeting to discuss the proposed transaction and the draft merger agreement provided by SunEdison. At the invitation of the Board, representatives of Vivint Solar’s management, Wilson Sonsini and Morgan Stanley also attended the meeting. Also in attendance were representatives of Simpson Thacher & Bartlett LLP (“Simpson Thacher”), counsel to Blackstone, whom the Board invited to attend in order to address any issues that arose specifically relating to Blackstone.

At the meeting, a representative of Wilson Sonsini reviewed the fiduciary duties of the directors with respect to the evaluation of the proposed transaction. Following the discussion, management provided an update to the Board regarding the transaction timing and process, including status of SunEdison’s due diligence efforts.

At this meeting, a representative of Morgan Stanley reviewed with the Board a list of parties who would possibly have an interest in acquiring Vivint Solar’s business. During the discussion that followed, the Board discussed with Morgan Stanley these potential acquirors, and particularly how the group was believed to be very limited. The Board discussed with Morgan Stanley how financial buyers would be unlikely to be interested in acquiring Vivint Solar. The Board and Morgan Stanley also discussed the limited group of potential strategic buyers and reviewed together the various challenges that each such buyer would face in acquiring Vivint Solar. The Board considered that each potential strategic buyer would likely face its own set of challenges in seeking to consummate an acquisition of Vivint Solar on terms and a timeframe more favorable than those being discussed with SunEdison. After such review and discussion, the Board determined that, as a result, the pursuit of a transaction with another party could put the transaction with SunEdison at risk, and that in any event there would be an opportunity post-signing for other interested buyers to submit a proposal. Following this discussion, the Morgan Stanley representatives left the meeting.

Following these discussions, Wilson Sonsini again led the Board in a discussion of the Board’s fiduciary duties in connection with the transaction. As part of this discussion, Mr. Wallace provided the Board with additional information he had obtained concerning the previously disclosed investment by an affiliate of Blackstone in assets controlled by SunEdison. Mr. Wallace informed the Board that Blackstone Strategic Opportunities Fund, referred to as “BSOF,” a part of Blackstone’s Hedge Fund Solutions Group, referred to as “BAAM,” had co-invested $50 million into TerraForm Global, a controlled affiliate of SunEdison, at the solicitation of a third party hedge fund manager as part of a May 2015 $175 million equity capital raise that was publicly disclosed.

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TerraForm Global. Mr. Wallace further advised the Board that the private equity business of Blackstone (which beneficially owns the investment in Vivint Solar) is walled off from the BAAM and BSOF businesses, including this investment in TerraForm Global, and reiterated that he did not consider the existence of this investment in TerraForm Global to represent a conflict of interest.

In addition, Mr. Wallace discussed with the Board that another private equity portfolio company of Blackstone and professionals of Blackstone involved with this portfolio company had participated in discussions, and may participate in future discussions, with affiliates of SunEdison regarding the possibility of the sale of assets or business units to SunEdison. Mr. Wallace confirmed to the Board that neither he nor any of Vivint Solar’s directors employed by Blackstone had been involved in any of these business discussions. As of the date of this proxy statement, such discussions have been terminated.

Finally, Mr. Wallace indicated to the Board that Blackstone private equity fund that had invested in Vivint Solar was under no pressure to do a deal in the near term as it had no need to obtain immediate liquidity for the investment in Vivint Solar. Mr. Wallace indicated that the relevant investing fund, Blackstone Capital Partners VI, was still in its original investment period, so that the end of the life of that fund remained many years away.

Mr. Wallace expressed his belief that the foregoing did not give rise to a conflict of interest in regard to the consideration of the prospective sale of Vivint Solar to SunEdison, but that, in order to alleviate any concern in this regard, he would be supportive of any Board decision to establish a special committee comprised of independent directors not employed by Blackstone whose recommendation in favor of the acquisition would be required as a condition to the approval by the full Board of any sale of Vivint Solar to SunEdison.

The Board considered the business interactions disclosed by Mr. Wallace and whether to appoint a special committee. After discussion, while the Board did not believe that Blackstone business interactions gave rise to a requirement that the Board form a special committee, the Board determined that a special committee would be prudent and useful in order to facilitate the process of the transaction with respect to material issues and, if needed, to consider any issues that might arise with respect to Blackstone. Following discussion of these interactions, the Board approved the formation of a special committee (the “Special Committee”) composed of David D’Alessandro, Joseph S. Tibbetts, Jr. and Joseph F. Trustey. In choosing such composition, the Board selected three individuals who were not employed by Blackstone, while recognizing that, at the time, Mr. D’Alessandro was chairman and former interim CEO of SeaWorld Entertainment Inc. (“SeaWorld”), Blackstone had a substantial minority interest in SeaWorld, and Messrs. Trustey and D’Alessandro were members of 313’s board of managers. The Board granted the Special Committee the authority to review and provide feedback to the Board and Vivint Solar’s management, as it deemed appropriate, regarding any material issues that might arise with respect to the proposed sale of Vivint Solar to SunEdison or other issues that may arise where it would be prudent for a separate independent committee to review these issues, and the Board resolved that a recommendation by the Special Committee of the acquisition by SunEdison of Vivint Solar would be a precondition to the full Board’s approval of the proposed acquisition.

During this meeting, the representative of Wilson Sonsini also reviewed with the Board certain material terms in SunEdison’s draft merger agreement that had been provided earlier in the week. In particular, the representative of Wilson Sonsini summarized (among other things) SunEdison’s proposal that Vivint Solar’s controlling shareholder, 313, deliver a written consent approving the transaction within one day of the execution of the merger agreement, the limitations that structure would place on Vivint Solar’s ability to consider or accept competing acquisition proposals and how if the merger agreement was terminated in connection with Vivint Solar entering into a superior proposal, Vivint Solar would be required to pay a termination fee, the size of which had not been specified. The Wilson Sonsini representative also summarized certain qualifications contained in the merger agreement on SunEdison’s obligations to obtain financing for the purchase price. In particular, the merger agreement provided that if the financing contemplated for the transaction was not available, SunEdison would only be required to use “reasonable best efforts” to obtain alternative financing and that SunEdison was

 

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contemplating adding a termination right that would be available to SunEdison if its financing for the transaction was unavailable upon payment of a reverse termination fee by SunEdison.

The Board discussed the merger agreement and the method proposed by SunEdison for calculating the number of shares of SunEdison common stock to be issued per share of Vivint Solar stock in the proposed transaction, or the “exchange ratio.” In particular, the Board noted the SunEdison proposal provided that the exchange ratio would be determined based on the trading price of SunEdison common stock for the 30 consecutive trading days ending on (and including) the third trading day immediately prior to the closing, subject to a collar. The collar provided that if the trading price of SunEdison’s common stock were to fall below a minimum dollar amount at closing, or if the trading price were to exceed a maximum dollar amount at closing, the exchange ratio would be calculated as if the trading price were the same as the minimum dollar amount or maximum dollar amount, respectively. The maximum and minimum dollar amounts were left unspecified in SunEdison’s initial draft merger agreement.

Following further discussion, the Board, with its advisor Wilson Sonsini, then discussed certain material changes to be made to the merger agreement. In particular, the Board determined that the merger agreement should be revised to provide for a market check pursuant to which Vivint Solar would be permitted to respond to and negotiate unsolicited alternative acquisition proposals made to Vivint Solar after signing the merger agreement, and to allow the Board the ability to terminate the merger agreement, upon the payment of an acceptable breakup fee, if it determined that an alternative acquisition proposal constituted a superior proposal. The Board also discussed providing for an unqualified obligation of SunEdison to obtain financing for the transaction. The Board directed the representatives of Wilson Sonsini to revise the merger agreement to reflect the changes discussed and to discuss the merger agreement further with the Special Committee on June 21, 2015.

On the same date, SunEdison delivered financial projections to Morgan Stanley in response to Morgan Stanley’s reverse due diligence requests in connection with SunEdison’s proposal that a portion of the merger consideration be composed of SunEdison’s common stock.

On June 20, 2015, Wilson Sonsini delivered a revised draft of the merger agreement to the Special Committee, which was also simultaneously delivered to the full Board.

On June 21, 2015, the Special Committee held a meeting to discuss the proposed revisions to the merger agreement. At the invitation of the Special Committee, the other members of the Board as well as representatives of Vivint Solar’s management and Wilson Sonsini also attended the meeting. At the meeting, Mr. Trustey, a managing director at Summit Partners, informed the Board that hedge funds affiliated with Summit Partners held a relatively small investment in SunEdison and a relatively small investment in a short position with respect to TerraForm Power. Mr. Trustey then informed the Board that he did not believe either investment was material and that a stop order had been placed by Summit Partners on trading in those entities. The other members of the Special Committee acknowledged Mr. Trustey’s disclosure and determined that Mr. Trustey should remain on the Special Committee.

The representatives of Wilson Sonsini then reviewed for the Special Committee certain material changes that were made to the merger agreement, particularly regarding the ability of the Board to respond to alternative takeover proposals and the termination fee to be paid by Vivint Solar in connection with a termination for a superior proposal. During this discussion, the Special Committee discussed the importance of Vivint Solar’s ability to accept an alternative proposal during a period following the signing of the merger agreement in order for the Board to be able to satisfy its fiduciary duties. Additionally, rather than the stockholder consent process proposed by SunEdison, the revised merger agreement provided that stockholder approval would be solicited at a stockholder meeting and that 313 would enter into a voting agreement. The revised draft also provided for an unqualified obligation on the part of SunEdison to obtain financing for the transaction. The Special Committee also discussed the revisions to the merger agreement that provided that if SunEdison’s contemplated financing was not available, SunEdison would be required to obtain alternative financing, that financing for the transactions was not a condition to the transaction, and that SunEdison would not have a right to terminate the

 

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merger agreement based on its inability to obtain financing for the transaction. Following discussion, the Special Committee and the other directors present instructed Wilson Sonsini to deliver a revised draft of the merger agreement to Kirkland & Ellis.

Later that day, Wilson Sonsini delivered the revised draft of the merger agreement to Kirkland & Ellis.

On June 23, 2015, Messrs. Lapidus and Lindquist had a call to discuss process and timing. During the call, Mr. Lindquist expressed the importance to Vivint Solar of the speed of execution of the merger agreement and Mr. Lapidus informed Mr. Lindquist that SunEdison would not be in position to execute the definitive agreement before mid-July.

On June 24, 2015, the Special Committee met to discuss the transaction, with representatives of Vivint Solar’s management and Wilson Sonsini in attendance. During the meeting, the Special Committee was advised that SunEdison would not be in a position to execute the definitive agreement before mid-July. The Special Committee also discussed SunEdison’s need to obtain substantial financing for the transaction, the issues that could arise for the acquisition if SunEdison had difficulties obtaining the financing and how best to address these in the merger agreement. Wilson Sonsini also reported to the Special Committee that it had delivered a draft of the voting agreement to be entered into by 313 to Kirkland & Ellis on June 23, 2015 that provided that the voting agreement would terminate if, among other reasons, Vivint Solar terminated the merger agreement or if the Board changed its recommendation to Vivint Solar’s stockholders.

On June 25, 2015, Mr. Butterfield attended all-day on-site meetings with SunEdison management and met with certain members of SunEdison’s board of directors to further discuss Vivint Solar’s business and to discuss how Vivint Solar’s business can help SunEdison with expansion of capacity and bandwidth to grow SunEdison’s existing residential business. As part of this discussion, Mr. Chatila conveyed to Mr. Butterfield the importance of retention of management in the transaction and SunEdison’s concern that all executive stock options would vest at closing pursuant to their terms. Accordingly, Mr. Chatila indicated that SunEdison would be asking members of Vivint Solar’s management to revest up to 40% of their stock options in connection with the proposed transaction. During this discussion, Mr. Chatila indicated that SunEdison would propose that employees of Vivint Solar would be granted approximately 2.7 million SunEdison RSUs in connection with their employment following the closing of the transaction. Mr. Chatila also discussed with Mr. Butterfield certain matters related to SunEdison’s continued due diligence efforts.

On the same day, Mr. Domenech and Mr. Wallace discussed the proposed transaction by telephone, including the progress of SunEdison’s due diligence review. They also discussed recent volatility in the marketplace. During the call, Mr. Domenech indicated that a purchase price reduction had been discussed by members of SunEdison management and that due to certain matters discovered during due diligence, SunEdison would likely be proposing a purchase price reduction of approximately $0.90 per share, or approximately $100 million in the aggregate, which would reduce the cash portion of the purchase price.

On June 26, 2015, Mr. Domenech emailed Mr. Butterfield to reiterate that SunEdison would be proposing a price reduction.

On that same day, Mr. Butterfield had a telephone call with Mr. Chatila in which Mr. Butterfield expressed his view that the Board would resist a price reduction, but that Mr. Butterfield believed Vivint Solar’s key executives would agree to revesting a portion of their stock option awards.

On June 27, 2015, a representative of Morgan Stanley spoke to Mr. Domenech, who confirmed that SunEdison would be requesting a purchase price reduction. Mr. Domenech also advised the representative from Morgan Stanley that the reduction was based on certain due diligence findings, including SunEdison’s belief that Vivint Solar needed a significant amount of additional capital to successfully grow its business.

 

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On June 28, 2015, Kirkland & Ellis delivered a revised draft of the merger agreement to Wilson Sonsini. The revised draft reverted to SunEdison’s initial position that 313 would be required to deliver an irrevocable written consent within one day of signing the merger agreement, but provided for a period of 30 days following execution of the merger agreement during which the Board would be able to negotiate potential superior proposals and ultimately terminate the merger agreement in order to accept a superior proposal. The revised draft also provided for a termination fee payable by Vivint Solar in connection with a termination for a superior proposal of 3.5% of the aggregate purchase price, and replaced SunEdison’s unqualified obligation to obtain financing for the transaction with a covenant to use reasonable best efforts to obtain financing. The revised merger agreement did not provide SunEdison a termination right based on its inability to obtain financing for the transaction.

As of the close of markets on June 29, 2015, Vivint Solar’s closing trading price was $12.05, reflecting a 14.4% decline since SunEdison delivered its proposal on June 6, 2015.

On July 1, 2015, representatives of SunEdison contacted Morgan Stanley and indicated that, in addition to the decrease in aggregate price that was previously conveyed, SunEdison intended to further revise its offer to double the portion of the aggregate purchase price that would be paid in SunEdison common stock and make a corresponding reduction in the portion to be paid in cash.

On that same day, the Special Committee held a meeting. At the invitation of the Special Committee, the other members of the Board as well as representatives of Vivint Solar’s management, Wilson Sonsini and Morgan Stanley also attended the meeting. Also in attendance were representatives of Simpson Thacher, whom the Special Committee invited to attend in order to address any issues that arose specifically relating to Blackstone. The Special Committee received an update on the status of discussions with SunEdison, particularly with respect to SunEdison’s proposed timing of the transaction and SunEdison’s anticipated proposal to reduce the purchase price by approximately $100 million and double the portion of the purchase price to be paid in SunEdison common stock, with each such adjustment reducing the portion of the consideration to be paid in cash. The representative of Wilson Sonsini reviewed for the Special Committee certain material issues from SunEdison’s latest draft of the merger agreement.

The representative of Morgan Stanley led the Special Committee through a discussion regarding SunEdison’s proposal to subject the number of shares to be issued in the transaction to a collar, noting the possibility that the collar could serve to reduce the value of the portion of the purchase price to be issued as SunEdison common stock if the trading price of SunEdison’s common stock were to drop below the collar’s minimum dollar amount, or could serve to increase the value of the portion of the purchase price issued as stock if the trading price of SunEdison’s common stock were to rise above the collar’s maximum dollar amount. During this discussion, the Special Committee considered the typical ranges of collars from recent transactions and the Special Committee determined that it would be advisable that each of the maximum dollar amount and minimum dollar amount specified in the collar would be set at between 10% to 15% above and below, respectively, the trading price of SunEdison’s common stock as determined at the execution of the merger agreement. After discussion, the Special Committee directed management to propose a 15% collar based on the 10-day trailing average measured two days prior to the closing of the transaction.

During the meeting, Mr. Butterfield discussed with the Special Committee retention packages that SunEdison was proposing to make to Vivint Solar’s key executives, including that SunEdison restricted stock units with a value at the time of approximately $70 to $80 million would be granted to Mr. Butterfield, members of Vivint Solar’s management and other employees of Vivint Solar. (Mr. Butterfield’s estimation of the value of the awards was based on the approximately 2.7 million RSUs that SunEdison proposed to issue, assuming a trading price of SunEdison common stock of approximately $30 per share.) Mr. Butterfield also advised the Special Committee that SunEdison was still requesting that key members of management agree to revest approximately 40% of their vested stock options in connection with the transaction.

 

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The Special Committee also discussed in depth the change in purchase price proposed by SunEdison, both with respect to the aggregate price and the mix between cash and stock consideration. The Special Committee considered the financial condition of Vivint Solar, competition in the industry, the funding needs of Vivint Solar as well as the recent drop in the trading price of Vivint Solar’s common stock. After discussion, the Special Committee determined to proceed with negotiations with SunEdison, subject to satisfactory resolution of open issues and SunEdison’s commitment to proceed expeditiously with the transaction and directed Mr. Wallace to continue further negotiations with SunEdison.

On July 2, 2015, Messrs. Wallace and Domenech had a call to discuss the proposed transaction, during which Mr. Domenech reiterated SunEdison’s anticipated proposal to reduce the purchase price by $100 million and increase the portion of the consideration to be paid in stock, with each such adjustment reducing the portion of the consideration to be paid in cash. Mr. Wallace indicated that both of these changes would be very difficult for Vivint Solar to concede. Mr. Wallace also stressed the importance of deal certainty and speed of execution if a price was ultimately agreed upon between the parties. Mr. Domenech indicated that without a purchase price reduction, SunEdison would not be willing to proceed with the deal. Although the parties did not come to agreement on any revised terms on this call, SunEdison expressed an intent to deliver a revised offer letter following this conversation.

On July 5, 2015, the exclusivity period in the confidentiality agreement with SunEdison expired at 11:59 p.m. Eastern time.

On July 6, 2015, Vivint Solar’s stock price closed at $10.19 per share, representing a 27.6% decline from the $14.08 per share closing price of Vivint Solar’s stock on June 5, 2015, the final trading day before the parties discussed a per share transaction price of $18.68.

On July 7, 2015, Messrs. Wallace, Domenech and Hernandez met to discuss the transaction. During this meeting, Messrs. Domenech and Hernandez reiterated that SunEdison would not be willing to proceed with the deal without a purchase price reduction. In addition to the rationale for reducing the purchase price that SunEdison had raised in the past, Mr. Domenech also raised that the $18.68 price constituted a premium of more than 80% on Vivint Solar’s closing trading price of $10.19 on July 6, 2015, which premium SunEdison believed it could not justify to its stockholders.

On July 8, 2015, Mr. Domenech informed a representative of Morgan Stanley that SunEdison intended to deliver a revised letter of intent to Vivint Solar that day.

On that same day, SunEdison delivered a draft letter of intent to Vivint Solar, proposing a new purchase price of $16.25 per share, comprised of $7.03 per share in cash and $9.22 per share in common stock of SunEdison. The price represented approximately a 51% premium over Vivint Solar’s closing price of $10.75 on July 7, 2015 and a 23% premium to Vivint Solar’s average closing price over the prior 30 trading days. The letter of intent also required 313 to execute and deliver a consent approving the transaction within 24 hours from the execution of the definitive merger agreement, but provided Vivint Solar would have a 45 day period following the date the merger agreement was executed to terminate the merger agreement in order to accept an unsolicited superior proposal, subject to the payment of a breakup fee equal to 3.4% of the aggregate purchase price. The letter of intent also provided that Vivint Solar’s top 11 executives would be required to revest 40% of their vested stock options, which revested options would vest in equal annual installments over the two year period following the closing of the proposed transaction, and provided that the remaining 60% of the executive’s options would be settled in cash at the closing of the transaction. The letter of intent proposed a retroactive extension of the exclusivity period from July 5, 2015 to July 15, 2015.

On that same day, Messrs. Wallace, Domenech, Lapidus and Rik Gadhia, vice president of corporate development for SunEdison and TerraForm Power, had a telephone call during which the SunEdison representatives summarized the revisions to the proposed transaction in the letter of intent that SunEdison delivered to Vivint Solar.

 

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On July 9, 2015, the Board (including all members of the Special Committee) met to discuss the revised proposal from SunEdison. At the invitation of the Board, representatives of Vivint Solar’s management, Wilson Sonsini and Morgan Stanley were in attendance. Also in attendance were representatives of Simpson Thacher, whom the Board invited to attend in order to address any issues that arose specifically relating to Blackstone. The Board was updated on the status of discussions with SunEdison and the terms of the revised indication of interest as conveyed by SunEdison. Mr. Wallace advised the Board that SunEdison had communicated to him that it still desired to proceed with the transaction, and had draft financing commitments ready to share with Vivint Solar once the purchase price had been agreed. The Board then discussed the key issues presented by the revised SunEdison proposal as well as the requested extension of exclusivity, which had expired on July 5, 2015.

The Board discussed the prospects of Vivint Solar as a standalone business as well as whether any third parties would likely be interested in acquiring Vivint Solar for a higher price than the revised price proposed by SunEdison. The Board considered the challenges it was facing as a standalone business, including the competitive pressures facing Vivint Solar, the substantial financing needs of Vivint Solar as well as the pending reduction in the federal investment tax credit rate expected to occur in 2017. The Board further considered the recent decrease in the trading price of Vivint Solar’s common stock and discussed the likelihood that in an offering by Vivint Solar of its common stock, the price per share would be at a discount to Vivint Solar’s trading price at the time of such offering as well as a significant discount to Vivint Solar’s price at its initial public offering. The Board then discussed in detail the potential acquirors for the business, discussing the most likely buyers and the level of interest they might have in Vivint Solar. Following discussion, the Board concluded that no other bidders were likely to propose an acquisition more favorable than the revised SunEdison proposal, directed Mr. Wallace to negotiate with SunEdison to seek an increase in the per share purchase price being proposed by SunEdison and authorized Mr. Wallace to propose a per share purchase price of $17.00. The Board also directed Wilson Sonsini to revise the merger agreement as instructed by the Board.

Following the board meeting, Messrs. Wallace and Domenech had a call to discuss the feedback of the Board. On the call, Mr. Wallace informed Mr. Domenech that Vivint Solar would not agree to a transaction with SunEdison at the price proposed by SunEdison, but that Vivint Solar would consider a price of $17.00 per share.

On the same date, representatives of Blackstone, certain members of Vivint Solar’s board of directors and representatives of Morgan Stanley had a call to discuss a general overview of SunEdison’s business.

On July 10, 2015, on a call with Mr. Wallace, Mr. Domenech indicated that SunEdison wished to change the composition of the consideration to pay a portion of the proposed purchase price in the form of a promissory note that would be issued by Vivint Solar to Vivint Solar’s stockholders, and suggested that Mr. Wallace have a call with Brian Wuebbels, the chief financial officer of SunEdison, to discuss the potential alternative composition of the consideration.

Mr. Wallace had separate calls with each of Mr. Domenech and Mr. Wuebbels to discuss the SunEdison proposal to include a promissory note issued by Vivint Solar as part of the merger consideration. Mr. Wallace advised Messrs. Domenech and Wuebbels that he did not think the Board would be agreeable to a transaction in which a Company promissory note constituted a portion of the merger consideration. Mr. Wuebbels indicated that without a promissory note constituting a portion of the purchase price (even without increasing such purchase price as requested by Mr. Wallace), it would be difficult for SunEdison to move forward with the proposed acquisition of Vivint Solar. Following this discussion, Mr. Wuebbels emailed Mr. Wallace acknowledging the parties were not in agreement regarding the amount or composition of the purchase price and indicated that SunEdison would send Vivint Solar a revised offer reflecting the proposed new composition, and the parties could discuss it further at that time.

Following these calls, SunEdison delivered a revised letter of intent to Vivint Solar reflecting an increased purchase price of $17.00 per share, comprised of $11.82 per share in cash and $5.18 per share in the form of a

 

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promissory note to be issued by Vivint Solar, as a subsidiary of SunEdison. The price represented approximately a 55% premium over Vivint Solar’s closing price of $10.95 on July 9, 2015 and a 31% premium to Vivint Solar’s average closing price over the prior 30 trading days. Under the revised proposal, the public stockholders of Vivint Solar would have the option to elect either all cash or their pro rata share of cash and the promissory note to be issued by Vivint Solar. To the extent that any public shareholders elected to receive all cash, the portion of the consideration payable to the non-public stockholders in the form of the promissory note issued by Vivint Solar would be increased, and the portion of the cash consideration payable to the non-public stockholders would be reduced, proportionately. The letter of intent also proposed a retroactive extension of the exclusivity period from July 5 to July 19, 2015. The terms regarding the treatment of management equity, stockholder approval and fiduciary termination rights and the size of the termination fee were substantially the same as had been set forth in SunEdison’s July 8, 2015 letter of intent, except that the period during which Vivint Solar could consider unsolicited superior proposals was reduced from 45 days to 30 days.

On July 11, 2015, the Board (including all members of the Special Committee) held a meeting to discuss the revised offer letter received from SunEdison. At the invitation of the Board, representatives of Vivint Solar’s management, Wilson Sonsini and Morgan Stanley also attended the meeting. Also in attendance were representatives of Simpson Thacher and Blackstone, whom the Board invited to attend in order to address any issues that arose specifically relating to Blackstone. The Board discussed the revised proposal from SunEdison. In particular, the Board discussed issues with respect to the promissory note proposed to be issued by Vivint Solar, including the likely difficulty in valuing such security given the fact that the note would constitute a debt instrument issued by a non-public subsidiary of SunEdison and would not have an existing trading market, as well as the complexity of the transaction that the promissory note presented and the potential increased risk to the transaction as a result of such complexity. The Board also believed that giving public stockholders the ability to elect all cash consideration was inconsistent with its preference that all stockholders should receive the same form of consideration with respect to their shares. As a result of these issues, the Board determined that the proposed promissory note was unacceptable. Following discussion, the Board directed Mr. Wallace and management to convey to SunEdison that Vivint Solar would not accept a transaction where a portion of the merger consideration was being paid in the form of a Company promissory note. The Board further considered whether it would accept any consideration other than cash or SunEdison common stock, and determined that it would consider a SunEdison debt security, particularly so long as it was convertible into SunEdison common stock and contained other terms that were acceptable to Vivint Solar.

Following the meeting of the Board, representatives of Vivint Solar, Blackstone, Wilson Sonsini, Simpson Thacher, and Morgan Stanley held a telephone call with representatives of SunEdison to discuss SunEdison’s proposal that the purchase price would include a promissory note issued by Vivint Solar. During the discussion, Vivint Solar’s representatives conveyed the Board’s position that a promissory note issued by Vivint Solar would not be acceptable.

On July 12, 2015, SunEdison delivered a revised letter of intent to Vivint Solar that reduced the purchase price to $16.50 per share, comprised of $9.89 per share in cash, $3.31 per share in SunEdison common stock and $3.30 per share in the form of a convertible note to be issued by SunEdison and that extended the exclusivity period from July 5 to July 19, 2015. The price represented approximately a 46% premium over Vivint Solar’s closing price of $11.34 on July 10, 2015 and a 28% premium over Vivint Solar’s average closing price over the prior 30 trading days. SunEdison indicated that this was its best and final offer. The letter of intent also provided that 313 would be required to enter into an agreement that would prohibit it from transferring the proposed convertible note for a period of two years, and did not provide that 313 would receive any extra consideration for entering into a lockup agreement. The terms regarding the treatment of management equity, stockholder approval and fiduciary termination rights and the size of the termination fee were substantially the same as was set forth in the July 10, 2015 letter of intent.

On that same day, Mr. Butterfield proposed to SunEdison revised terms relating to the treatment of Vivint Solar’s executive employees, including proposing that the percentage of their stock options to be revested be reduced from the 40% originally proposed by SunEdison to 20%.

 

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Also on that day, Messrs. Wallace, Chatila, Wuebbels, Domenech and Lapidus, along with a representative of Morgan Stanley, had a call in which the representatives of SunEdison outlined the terms of the letter of intent that had been delivered to Vivint Solar that day. During such discussion, the representatives of SunEdison and Vivint Solar specifically discussed the terms of the SunEdison convertible note that was being proposed by SunEdison, and in particular that the note would have terms based on the terms of convertible notes that SunEdison had recently issued in the public markets, other than the pricing terms.

On July 13, 2015, SunEdison delivered to Wilson Sonsini a draft of the financing commitment letters related to SunEdison’s debt financing of the proposed transaction. The commitment letters contemplated that the financing would be obtained through the following facilities: (1) a $500 million term facility to be borrowed by a wholly-owned indirect subsidiary of SunEdison, referred to herein as the “SunEdison financing commitment” and (2) a $960 million unsecured bridge facility to be borrowed by Terra LLC, a controlled affiliate of SunEdison, referred to herein as the “TERP financing commitment”. SunEdison indicated that the proceeds of the debt facilities would be available to fund the cash portion of the merger consideration. The funding of the commitments were each to be subject to customary representations, warranties and conditions, including the negotiation of definitive documentation and other customary closing conditions. Notwithstanding the terms of the debt commitment letters, the merger agreement continued to provide that SunEdison’s obligation to close the proposed merger was not subject to SunEdison’s ability to obtain the financing contemplated under the financing commitment letters.

On the same day, the Board (including two members of the Special Committee) held a meeting to discuss the revised indication of interest received from SunEdison on July 12, 2015. At the invitation of the Board, representatives of Vivint Solar’s management, Wilson Sonsini and Morgan Stanley also attended the meeting. Also in attendance were representatives of Simpson Thacher, whom the Board invited to attend in order to address any issues that arose specifically relating to Blackstone. The Board discussed the terms of the proposed SunEdison convertible note. During the discussion, the Board considered how the SunEdison convertible note consideration was an improved offer over the consideration in which Vivint Solar would have issued a promissory note. In particular, the Board noted that the convertible note would be issued by SunEdison and that it was proposed to be based (other than pricing terms) on the terms of convertible notes that had recently been issued by SunEdison in a registered public offering under the Securities Act and that were publicly traded, which could provide greater visibility on the value of the convertible notes. Further, the Board noted that the convertible notes would be registered under the Securities Act and would be publicly traded (which could help to create a market for such convertible notes) and that the convertible notes would ultimately be convertible into common stock of SunEdison. The Board also considered the trading restrictions on the promissory note that 313 and its permitted transferees (potentially including Blackstone) would be required to agree to in connection with the transaction, including that neither 313 nor Blackstone would receive any additional consideration as part of accepting the restrictions, and that the convertible notes being issued to public stockholders would not be subject to trading restrictions. The Board considered that SunEdison had indicated it would require a portion of the purchase price be paid pursuant to a SunEdison convertible note in order to proceed with the transaction and that SunEdison had indicated this was its best and final offer.

The Board also considered whether the speed of execution and deal certainty provided by SunEdison’s offer were sufficient, given the continued importance of those two factors for reasons the Board had noted in its previous deliberations. In particular, the Board discussed the draft commitment letters that provided for the debt financing that SunEdison intended to obtain to finance the cash portion of the purchase price, and the effect of the financing structure the letters outlined on deal certainty. The Board discussed how the commitment letters were subject to certain conditions that were not contemplated in the merger agreement, including conditions related to the preparation of financial statements with respect to the combined business, but noted that obtaining financing in the manner contemplated under the financing commitments was not a condition to the closing of the merger in the merger agreement.

Following discussion, the Board determined that Vivint Solar should engage with SunEdison based on SunEdison’s most recent proposal, subject to achieving satisfactory terms regarding certainty of closing and

 

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finalization of the transaction documents on satisfactory terms. The Board then directed Wilson Sonsini to distribute a revised draft of the merger agreement to Kirkland & Ellis, and to engage in negotiations and discussions to finalize the transaction documents. Vivint Solar did not sign the offer letter delivered by SunEdison. As a result, exclusivity (which had lapsed on July 5, 2015) was not extended.

Later that day, Wilson Sonsini delivered a revised draft of the merger agreement to Kirkland & Ellis. Among other terms, the revised draft provided for a collar with a range 15 percent above and below the trading price of SunEdison common stock determined as of the execution of the merger agreement, provided that the transaction would be approved by Vivint Solar’s stockholders at a meeting as opposed to in a written consent executed by 313, provided that 313 would enter into a voting agreement, and provided that Vivint Solar would be allowed to negotiate potential superior transactions and ultimately terminate the merger agreement in order to accept a superior proposal at any time prior to approval of the transaction by Vivint Solar’s stockholders.

Also on that day, Messrs. Wallace and Chatila had a call to discuss the revised indication of interest. On this call, Mr. Wallace advised Mr. Chatila that the Board had approved continuing the discussions with SunEdison at the revised purchase price proposed by SunEdison, subject to achieving satisfactory terms and finalization of the transaction documents. At the direction of Vivint Solar’s management, representatives of Morgan Stanley had a call with representatives of SunEdison on that same date to review the financial projections previously provided by SunEdison.

On July 15, 2015, after a meeting of SunEdison’s board to discuss the merger agreement and related transactions, Kirkland & Ellis delivered a revised draft of the merger agreement along with an initial draft of the indenture for the SunEdison convertible notes to Wilson Sonsini. The revised merger agreement accepted that the transaction would be approved by Vivint Solar’s stockholders at a meeting but provided that the Board would have a fiduciary out to terminate the merger agreement in response to an unsolicited superior proposal for a period of 30 business days following the execution of the merger agreement. The revised draft also reduced the proposed collar on the stock portion of the purchase price to 10% above and below the trading price of SunEdison common stock determined as of the execution of the merger agreement. The revised draft also provided that if SunEdison’s contemplated financing was not available, that SunEdison would have an obligation to obtain alternative financing qualified by a “reasonable best efforts” standard. The revised draft also required Vivint Solar to take actions to terminate certain intercompany agreements between Vivint Solar and Vivint, Inc., a company that is majority-owned by 313 (the “Intercompany Agreements”), and amend and restate other Intercompany Agreements on commercially reasonable terms prior to the closing of the merger. The Intercompany Agreements were intended to facilitate Vivint Solar’s post-IPO transition and included a transition services agreement, a non-competition agreement, a trademark license, a co-marketing agreement, and a product supply agreement.

On that same day, members of Vivint Solar’s management and members of the Board, together with Messrs. Chatila and Wuebbels and representatives of Morgan Stanley, had a call to discuss SunEdison’s business and to enable Vivint Solar to conduct reverse due diligence on SunEdison. During this call, Mr. Wuebbels provided a detailed presentation with respect to SunEdison’s business. The presentation addressed SunEdison’s business model, international presence, product development, project pipeline, asset ownership, capital structure and business outlook.

On July 16, 2015, the Special Committee met to discuss the status of negotiations with Vivint Solar and the revised draft of the merger agreement received from SunEdison, with representatives of Vivint Solar’s management and Wilson Sonsini in attendance. The Special Committee discussed issues raised by the terms of the transaction proposed by SunEdison (including the issuance of convertible notes in the transaction, the conditions set forth in the financing commitments to be used to pay the cash portion of the purchase price (including that such financing commitments included closing conditions that were not set forth in the merger agreement), the remedies that would be available to Vivint Solar if the financing contemplated by the financing commitments were not available when the transaction was otherwise ready to close and SunEdison’s proposed

 

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treatment of the Intercompany Agreements) and the possible effects of such terms on deal timing, certainty of closing and Vivint Solar’s financial position. In particular, the Special Committee discussed how SunEdison’s proposal with respect to the termination and amendment of the Intercompany Agreements could act as a condition to closing outside of Vivint Solar’s control. The Special Committee also discussed the length of time following the signing of the merger agreement during which the Board would be able to accept superior proposals from other bidders. The Special Committee determined that the thirty business day period for such acceptances provided for in SunEdison’s draft was not sufficient, and that Vivint Solar should seek a longer period. The Special Committee also discussed potential revisions to the merger agreement with respect to the other issues discussed at the meeting. During the discussion, the Special Committee considered the anticipated time it would take between signing and closing of the proposed transaction, and the cash needs of Vivint Solar during such period. Mr. Butterfield then indicated that SunEdison continued to require executives to revest a substantial portion of their outstanding equity awards and that discussions regarding the revesting were ongoing.

On the same date, Mr. Wuebbels, members of Vivint Solar’s management, and representatives of Blackstone and Morgan Stanley had a call to further discuss reverse due diligence matters.

On that same date, Kirkland & Ellis delivered a revised draft of the voting agreement to Vivint Solar that provided that the voting agreement would only terminate upon the termination of the merger agreement. On the same day, Simpson Thacher delivered to Kirkland & Ellis a further revised draft of the voting agreement that provided for termination of the voting agreement upon, among other circumstances, termination of the merger agreement or upon a change of the recommendation of the Board during the post-signing period.

Kirkland & Ellis also delivered a draft lockup agreement to be signed by 313 that provided for a lockup of the convertible note to be issued to 313 for a period of two years and a lockup of the common stock of SunEdison for a period of six months. On that same day, Simpson Thacher delivered a further revised draft of the lockup agreement to Kirkland & Ellis, which, among other changes, removed the lockup with respect to common stock of SunEdison but included a six month lock-up over the common stock issued upon conversion of the convertible notes. Simpson Thacher, Wilson Sonsini and Kirkland & Ellis proceeded over the following days to finalize the lockup and voting agreements in consultation with their respective clients.

On July 17, 2015, Wilson Sonsini delivered to Kirkland & Ellis a revised draft of the merger agreement. The revised draft provided that in the event an acquisition proposal was received from a third party within the thirty business day period during which negotiation and acceptance of acquisition proposals was permitted, the period during which Vivint Solar would be allowed to negotiate and accept an acquisition proposal from that third party would be extended for an additional thirty calendar days. The revised draft also provided that if SunEdison’s contemplated financing was not available, that SunEdison would have an unqualified obligation to obtain alternative financing, and also removed from the merger agreement the covenant regarding treatment of the Intercompany Agreements, which SunEdison proposed to address in a separate agreement between Vivint Solar, Vivint, Inc. and SunEdison.

On that same day, Kirkland & Ellis, Wilson Sonsini and Simpson Thacher had a telephone conference to discuss how the proposed merger would impact the Intercompany Agreements. Representatives of Wilson Sonsini and Simpson Thatcher expressed their concerns with respect to SunEdison’s proposed treatment of these agreements in its prior draft of the merger agreement and conveyed that the amendment and termination of these agreements could not be an indirect condition to the closing of the transaction. The parties after consultation with their clients agreed that Vivint Solar, Vivint, Inc. and SunEdison would execute a letter agreement concurrently with the merger agreement that would include a description of amendments to the Intercompany Agreements that the parties would then negotiate prior to the closing (the “Side Letter”). The parties agreed that the consummation of these amendments would not be a condition to closing.

On July 18, 2015, Kirkland & Ellis delivered to Wilson Sonsini a revised draft of the merger agreement along with revised financing commitment letters. The revised draft of the merger agreement provided that Vivint

 

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Solar would be entitled to consider alternative proposals and terminate the merger agreement to accept any superior proposals made to Vivint Solar during a period of forty business days following execution of the agreement. The revised draft also provided that if SunEdison’s contemplated financing was not available, that SunEdison would have an unqualified obligation to obtain alternative financing.

The commitment letters contemplated that the financing would be obtained through the same two facilities that had been initially proposed. Along with the commitment letters, SunEdison provided documentation of the sale by SunEdison to Terra LLC of certain renewable power assets of Vivint Solar, referred to herein as the TERP Acquisition, in exchange for cash consideration which would then be used by SunEdison to finance the acquisition. The funding of each of the commitments, as well as the TERP Acquisition, were each to be subject to customary, representations, warranties and customary closing conditions, and the financing commitments were subject to the negotiation of definitive documentation.

On that same day, Kirkland & Ellis delivered to Simpson Thacher and Wilson Sonsini an initial draft of the Intercompany Agreement Side Letter, which the parties negotiated over the course of July 18 to July 19, 2015. The Side Letter contemplates an accelerated transition away from the “Vivint Solar” name and mark, a framework that encourages a more expedient operational separation of Vivint Solar and Vivint, Inc., and a reduced scope of the non-competition and non-solicitation obligations that were previously in place between Vivint Solar and Vivint, Inc.

On July 19, 2015, the Board (including all members of the Special Committee) held a meeting to consider the terms of the proposed strategic transaction. At the invitation of the Board, representatives of Vivint Solar’s management, Wilson Sonsini and Morgan Stanley also attended the meeting. Also in attendance were representatives of Simpson Thacher, whom the Board invited to attend to address any issues that arose specifically relating to Blackstone. The Board reviewed in detail the material terms of the merger agreement and the voting agreement to be executed by 313 and a discussion of the Board’s fiduciary obligations in connection with the proposed acquisition.

Mr. Butterfield reviewed with the Board the terms of the employment agreement amendments that SunEdison had asked the executives of Vivint Solar to enter into, including that SunEdison would be granting 2.7 million restricted stock units to Mr. Butterfield, members of Vivint Solar’s management and other employees of Vivint Solar. Mr. Butterfield also relayed to the Board that members of Vivint Solar’s management would be required to revest 20% of their vested options to purchase Vivint Solar’s common stock and that Mr. Butterfield would be required to revest 30% of Mr. Butterfield’s vested options.

During this meeting, the Board reviewed and finalized terms of the proposed engagement letter between Vivint Solar and Morgan Stanley. The Board also discussed certain business interactions of Morgan Stanley with SunEdison and TerraForm Power and Blackstone. After discussion, including consideration of such interactions, the Board approved the terms of the Morgan Stanley engagement letter.

The Board also discussed that SunEdison’s obligation to close the merger was not conditioned on SunEdison’s ability to obtain the financing contemplated under the financing commitment letters SunEdison had provided to Vivint Solar, further discussed whether SunEdison would be able to consummate the transaction if the financing contemplated by the commitment letters was unavailable, and discussed with its advisors the likely ability of SunEdison to obtain alternative financing, including through the public markets, if the financing contemplated in the financing commitments was not available. The Board also reviewed whether alternative parties would be interested in buying Vivint Solar and confirmed its prior determination that a third party would unlikely be interested in purchasing Vivint Solar at a more favorable price to the price being proposed by SunEdison. During this review, the Board noted that during a 40 business day period following the signing of the merger agreement, the Board would be entitled to consider unsolicited alternative proposals and terminate the merger agreement to accept any unsolicited superior proposals made to Vivint Solar during such period.

 

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A representative of Morgan Stanley then reviewed and discussed its financial analysis regarding the implied value of the merger consideration with the Board. At the request of the Board, Morgan Stanley delivered its oral opinion, which was subsequently confirmed in writing, to the effect that, as of that date and based on and subject to the assumptions, qualifications, limitations and other matters considered in connection with the preparation of the opinion, the per share merger consideration to be received by holders of Vivint Solar’s common stock (other than any such holder entering into the voting agreement) was fair, from a financial point of view, to the holders.

The Special Committee reviewed for the Board the process it had undertaken in connection with the proposed transaction and unanimously recommended that the Board approve the acquisition of Vivint Solar by SunEdison.

At this point, the Board considered whether to authorize a bonus pool for the retention of management and other employees. Management proposed the approval of a $2 million bonus pool to be used to grant transaction bonuses to employees of Vivint Solar, payable upon the closing. Management also discussed the possibility of a $5 million bonus pool to be used to grant transaction bonuses to management of Vivint Solar, payable upon the closing, which was proposed to be paid for by 313. Following discussion, the Board approved the $2 million bonus pool, but determined not to proceed with the $5 million bonus pool for management.

Following discussion, the Board (i) unanimously determined that the terms of the merger and merger agreement are advisable, fair to and in the best interests of Vivint Solar and its stockholders, and that the entry into the merger agreement and consummation of the merger and all of the other transactions contemplated by the merger agreement are in the best interests of Vivint Solar and its stockholders, (ii) unanimously approved the Voting Agreement entered into by 313 and determined that the transactions contemplated by the merger agreement as well as the voting agreement would not be subject to the provisions of, or any restrictions under, the provisions of Section 203 of the DGCL, and (iii) unanimously recommended that Vivint Solar’s stockholders adopt the merger agreement at a meeting of stockholders convened in accordance with the applicable provisions of Delaware law.

On that same day, SunEdison’s board of directors, members of SunEdison management, and representatives of Kirkland & Ellis met to discuss the proposed transaction and terms of the merger agreement and other key transaction documents. Following review and discussion among the members of the SunEdison board of directors, and after receiving the advice of their financial advisor and legal counsel, the SunEdison board of directors approved the merger and the related transactions and authorized management to seek to finalize the merger agreement and the other related agreements on terms consistent with those described to the SunEdison board of directors at the meeting.

Later that day, Mr. Butterfield spoke with Mr. Chatila regarding management retention between signing and closing and the need for retention bonuses to incentivize management post-closing given how competitive the solar development space is for knowledgeable and experienced executives, as well as to incentivize management to execute the key employee offer letters required by SunEdison and agree to the revesting of management’s existing options. Following discussion, Mr. Chatila agreed that Vivint Solar would be permitted to authorize an $8 million bonus pool (in addition to the $2 million bonus pool that had previously been authorized by the Board). The bonus pool would be allocated to executives of Vivint Solar as determined by Mr. Butterfield and Vivint Solar’s compensation committee, including for the retention of key executives.

In the afternoon of July 19, 2015, the Board (including all members of the Special Committee) met to discuss the additional $8 million bonus pool discussed between Messrs. Butterfield and Chatila. At the invitation of the Board, representatives of Vivint Solar’s management, Wilson Sonsini and Morgan Stanley also attended the meeting. The Board considered the advisability of approving the $8 million bonus pool, the need to incentivize management to enter into the offer letters with SunEdison that were a condition to SunEdison’s willingness to entering into the transaction, and that the additional $8 million would be paid for post-closing and would not result in a reduction to the purchase price being paid to stockholders in the transaction. Following discussion, the Board approved the bonus pool.

 

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Following the approval of both the Vivint Solar and the SunEdison boards of directors, the parties proceeded to finalize the transaction documents and schedules for execution.

On July 20, 2015, Vivint Solar and SunEdison executed the Merger Agreement and SunEdison and 313 executed the Voting Agreement and the Lockup Agreement. Prior to the commencement of trading on the NYSE, the parties issued a press release announcing the Merger Agreement.

Over the next few months the parties worked together on integration planning. In parallel with that process and as required by the Merger Agreement, the parties worked together to prepare a Registration Statement on Form S-4 to be included in the Vivint Solar proxy statement that would be filed with the SEC to register the convertible note consideration and stock consideration to be issued in the Merger. The preparation of the Proxy/S-4 was dependent upon the completion of pro forma financial statements required to be included in the Proxy/S-4, which were not completed until mid-October. Over this same period of time, the closing price of a share of SunEdison’s common stock declined significantly, from a value of $31.66 per share on the day of signing to a value as low as $6.66 on September 29, 2015. In October, SunEdison’s common stock generally traded below $10 per share and sometimes traded below $8 per share. During that same period, the closing price of a share of Vivint Solar’s common stock declined from $15.67 on the day of signing to a value as low as $10.20 on September 30, 2015. During October, the closing prices of Vivint Solar’s common stock ranged between $10.61 and $12.73 per share.

Following completion of the pro forma financial statements in mid-October, the parties worked together to finalize the Proxy/S-4. On October 19, 2015, representatives of SunEdison indicated to representatives of Vivint Solar that a further meeting of SunEdison’s board of directors was required to approve the S-4, and that a board meeting was scheduled for October 21, 2015. The parties agreed to work towards the filing of the Proxy/S-4 on the morning of October 22, 2015, after such meeting. However, on October 21, 2015, Mr. Chatila called Mr. Wallace to explain that SunEdison’s audit committee would separately need to approve the filing of the Proxy/S-4, and that a meeting for such purpose was scheduled for October 22, 2015.

On October 22, 2015, following the meeting of SunEdison’s audit committee, Mr. Chatila informed each of Mr. Butterfield and Mr. Wallace that SunEdison’s audit committee had not approved the filing of the Proxy/S-4 and that SunEdison did not intend to file the Proxy/S-4 that day due to concerns regarding the financial conditions of each of SunEdison and Vivint Solar and of the resulting combined entity. Mr. Chatila requested that representatives of SunEdison and Vivint Solar meet in person to discuss renegotiated terms for the transaction.

On the morning of October 23, 2015, the Board held a special meeting at which Mr. Wallace provided an update to the other members of the Board regarding the previous day’s discussions and to convey to the Board Mr. Chatila’s request for a meeting. At the invitation of the Board, representatives of Vivint Solar’s management and Wilson Sonsini also attended the meeting. Also in attendance were representatives of Simpson Thacher, whom the Board invited to attend to address any issues that arose specifically relating to Blackstone. After receiving the update, the Board considered potential alternatives available to Vivint Solar in reaction to SunEdison’s position, including accepting the meeting with SunEdison or commencing legal proceedings seeking specific performance of the terms of the Merger Agreement, particularly the obligation of SunEdison to file the Proxy/S-4. After further discussion, the Board determined that Vivint Solar should engage with SunEdison to obtain more information about SunEdison’s request and its intentions with respect to the transaction, but simultaneously also to prepare for litigation seeking to enforce Vivint Solar’s rights.

Later that day, per the Board’s directive, Mr. Wallace and Mr. Butterfield held a call with Mr. Chatila and Mr. Wuebbels. Citing the reasons described to Mr. Wallace on October 22, 2015, Mr. Chatila and Mr. Wuebbels proposed a revised transaction with a $3.00 reduction in per share cash consideration. In addition, Mr. Chatila and Mr. Wuebbels expressed a desire to have Blackstone provide a $250 million credit facility to SunEdison to

 

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help finance the operations of the combined company following the closing of the Merger. Mr. Wallace and Mr. Butterfield sought further explanation from Mr. Chatila and Mr. Wuebbels for this request, but did not attempt to negotiate the terms of such request at this time.

On October 25, 2015, the Board held a special meeting at which Mr. Wallace and Mr. Butterfield provided an update regarding the discussion with Mr. Chatila and Mr. Wuebbels on October 23, 2015. At the invitation of the Board, representatives of Vivint Solar’s management and Wilson Sonsini attended the meeting. Also in attendance were representatives of Simpson Thacher, whom the Board invited to attend to address any issues that arose specifically relating to Blackstone. After hearing the update provided by Mr. Wallace and Mr. Butterfield, the Board again considered Vivint Solar’s alternatives in light SunEdison’s decision not to file the Proxy/S-4, including engaging with SunEdison to renegotiate the transaction, commencing legal proceedings against SunEdison to seek specific performance or terminating the Merger Agreement and continuing as a standalone business in exchange for a settlement or commercial partnership with SunEdison or otherwise seeking damages from SunEdison for breach. The Board discussed the alternatives in terms of what was likely to produce the most favorable outcome for Vivint Solar’s stockholders and considered that SunEdison was bound by an enforceable contract to consummate the Merger, which was a valuable asset for stockholders, but the Board also recognized that SunEdison was experiencing increasing financial pressures. The Board considered that SunEdison would most likely be required to draw on its committed financing in order to consummate the transaction but that such debt financing commitments expired on March 18, 2016. Upon the loss of such commitments, the Board was concerned about the challenges SunEdison would face in obtaining alternative financing to consummate the Merger. In light of these factors, the Board considered whether a judicial order to compel SunEdison to file the Proxy/S-4 could be obtained in time in order for SunEdison to file the Proxy/S-4, respond to comments by the SEC, obtain effectiveness of the Proxy/S-4, mail the Proxy/S-4 to Vivint Solar’s stockholders and hold the stockholder meeting, which are all conditions to the closing of the merger, prior to March 18, 2016. The Board further considered Vivint Solar’s cash needs during the remainder of 2015 and early 2016 and noted that, during any litigation process, Vivint Solar must comply with all of the interim operating covenants of the Merger Agreement, which would inhibit Vivint Solar’s flexibility in obtaining financing without SunEdison’s consent. The Board also considered the negative impact on the standalone business of Vivint Solar associated with terminating the Merger Agreement and the additional negative impact on Vivint Solar in initiating legal action against SunEdison, and Vivint Solar’s performance during the previous quarter, including that Vivint Solar had installed fewer megawatts than expected. The Board further discussed other risks entailed by legal proceedings (either for specific performance or for damages), including whether such proceedings would foreclose the possibility of a renegotiated transaction with greater closing certainty, whether it would prompt increased involvement of the SunEdison stockholders who were expected to oppose the merger, and the potential harmful effect such litigation could have on SunEdison’s business (and thus, its ability to consummate the merger). The Board then discussed the terms on which Vivint Solar would consider entering into an amendment to the Merger Agreement, including potentially accepting a reduced consideration in exchange for enhanced certainty of closing a renegotiated transaction. After such discussions, the Board authorized Mr. Wallace to continue negotiations with SunEdison but to request that the Proxy/S-4 be filed immediately to demonstrate good faith by SunEdison. The Board further directed Wilson Sonsini to continue preparations to commence legal action to compel the filing of the Proxy/S-4 by SunEdison.

Later that same day, Mr. Wallace conveyed to Mr. Chatila the Board’s message that the Proxy/S-4 should be promptly filed. Mr. Chatila indicated that, while SunEdison was not prepared to file the Proxy/S-4, SunEdison would be open to revising the amount of its requested price decrease if SunEdison had a better understanding of Vivint Solar’s business performance and cash position. The parties continued to discuss the possibility of engaging in negotiations, and Mr. Chatila proposed a face-to-face meeting between the parties to be held on October 28, 2015.

On October 27, 2015, the Board held a special meeting where Mr. Wallace updated the Board on SunEdison’s request for a face-to-face meeting and the other matters discussed with Mr. Chatila. At the invitation of the Board, representatives of Vivint Solar’s management and Wilson Sonsini also attended the meeting. Also

 

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in attendance were representatives of Simpson Thacher, whom the Board invited to attend to address any issues that arose specifically relating to Blackstone. The Board also discussed SunEdison’s refusal to file the Proxy/S-4 immediately and SunEdison’s desire to better understand Vivint Solar’s business performance and cash position. After further discussion, the Board determined that Vivint Solar should engage with SunEdison to discuss the potential terms of a renegotiated transaction given the potential benefits of enhanced closing certainty as compared to the uncertainty litigation would generate. The Board authorized Mr. Wallace and members of Vivint Solar management to proceed with such discussions. The Board also discussed the possibility that 313 might accept consideration different from that received by noncontrolling stockholders in order to increase closing certainty and expedite the consummation of the Merger and considered whether a special committee of directors independent of 313 should be appointed to evaluate such a proposal.

On October 28, 2015, Mr. Wallace, Mr. Butterfield and Mr. Russell met with Mr. Chatila and Mr. Wuebbels in Bethesda, Maryland. At this meeting, Mr. Chatila and Mr. Wuebbels indicated that SunEdison had reviewed financial information provided by Vivint Solar’s management and reiterated SunEdison’s request for a $3.00 price reduction, citing the unanticipated cash needs at SunEdison (due to the terms of its own debt facilities) and other challenges faced by SunEdison in consummating the Merger. The Vivint Solar representatives sought additional clarification from Mr. Chatila and Mr. Wuebbels on the proposed revised transaction, but did not agree to any price reduction or any other revised terms. Following the meeting, representatives of Vivint Solar contacted representatives of Morgan Stanley to provide them with an update on the discussions with SunEdison.

On November 4, 2015, the Board held a special meeting to consider the updates from the October 28th meeting and the next steps in discussions with SunEdison. At the invitation of the Board, representatives of Vivint Solar’s management and Wilson Sonsini attended the meeting. Also in attendance were representatives of Simpson Thacher, whom the Board invited to attend to address any issues that arose specifically relating to Blackstone.

The Board discussed potential alternatives in response to SunEdison’s position, including commencing litigation, terminating the Merger Agreement in exchange for a settlement or strategic partnership with SunEdison or seeking damages, or to continue negotiating terms for a revised transaction. With respect to the litigation path and assuming a favorable judicial outcome, the Board considered the potential challenges in achieving an actual closing under the terms of the original Merger Agreement given SunEdison’s then-current financial situation, rapidly declining stock price and potential lack of access to capital markets. Having been given an update from Mr. Butterfield on Vivint Solar’s business, the Board also considered the challenges of remaining a stand-alone enterprise given the ongoing financing needs of Vivint Solar and the general weakness in the broader distributed solar energy financial markets.

After discussion and deliberation, the Board determined that a renegotiated transaction at a reduced price but with greater closing certainty was in the best interests of Vivint Solar’s stockholders as compared to the other alternative actions that were available, including litigation, and authorized Mr. Wallace to present a counter-proposal to Mr. Chatila whereby Vivint Solar would accept a reduction to the per share cash merger consideration of $0.50, resulting in a per share cash consideration of $9.39. The Board also discussed several terms that would enhance closing certainty, including a revision to the current closing condition in the Merger Agreement to ensure that changes to the business prior to the date of the amendment of the Merger Agreement would not constitute a failure of any condition to SunEdison’s obligations to consummate the Merger.

In regard to a renegotiated transaction, the Board discussed in detail and considered whether to propose to SunEdison an alternative structure providing for differential consideration between 313 and the other stockholders of Vivint Solar, the possibility of which had been initially raised in the Board meeting on October 27, 2015. Such structure, herein referred to as the “Reallocation,” would allow Vivint Solar’s public stockholders to receive all cash consideration (which would include the base cash consideration payable to such public stockholders and an additional amount of cash equal to the fair market value of the note and stock consideration that would otherwise have been payable to the public stockholders), and 313 would receive its base cash consideration less the additional cash payable to the public stockholders and all of the note and stock

 

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consideration that would have been payable to all of the Vivint Solar stockholders. Wilson Sonsini advised the Board of its fiduciary duties in assessing a transaction in which 313 and Vivint Solar’s public stockholders would receive different forms of consideration. The Board discussed the potential benefits that such a revised transaction structure could provide to Vivint Solar’s public stockholders, including increased liquidity, the volatility of the stock consideration and convertible note consideration which the public stockholders would no longer receive. The Board further discussed whether the Reallocation would offer timing advantages by eliminating the need to file and have declared effective a Proxy/S-4, a process that could take potentially months longer than a process where no Proxy/S-4 was required. The Board also considered its duties with respect to such Reallocation and whether a special committee, financial advisor or legal counsel might be required. In light of the debt commitments expiring on March 18, 2016, the Board considered the faster timetable associated with an all-cash deal to the public resulting from the Reallocation as increasing closing certainty. With regard to the Reallocation, the Board discussed on a preliminary basis the various methods by which the “fair market value” of the convertible note and stock consideration would be determined.

In addition to hearing the update on negotiations with SunEdison, representatives of 313 informed the Board that 313 was prepared to accommodate SunEdison’s request that it be provided with a commitment for a $250 million credit facility (subject to negotiation of acceptable terms). Representatives of 313 discussed with the Board certain of the material terms of such credit facility that it would be willing to provide and which it would seek in negotiations with SunEdison, including that the facility be secured by collateral in the form of power purchase agreements.

The Board then instructed Wilson Sonsini and Simpson Thacher to work together to prepare a term sheet summarizing the terms that could be presented to representatives of SunEdison, which would include not only price terms but the terms the Board had discussed as being necessary to increase closing certainty (including the Reallocation Option), and any other terms that legal counsel felt helpful to enhance closing certainty.

Later in the day on November 4, 2015, Mr. Wallace spoke to Mr. Chatila by phone and conveyed the terms of Vivint Solar’s proposal. Mr. Chatila expressed a willingness to pursue the Reallocation of consideration described by Mr. Wallace and expressed appreciation for 313’s willingness to provide a credit facility, but indicated that the proposed price concession was not sufficient from SunEdison’s perspective.

On November 5, 2015, Mr. Chatila contacted Mr. Wallace by phone and made a counter-proposal whereby the total reduction in cash consideration on a per share basis would be equal to $2.90, resulting in a per share cash consideration of $6.99, but with an offsetting increase of $1.25 in the per share stock consideration paid to each shareholder. Mr. Chatila also expressed a desire to negotiate the interest rate of the credit facility to be provided by 313. Mr. Chatila accepted the concept of the Reallocation.

Later that same day, the Board held a special meeting to consider the terms of Mr. Chatila’s proposal. At the invitation of the Board, representatives of Vivint Solar’s management and Wilson Sonsini attended the meeting. Also in attendance were representatives of Simpson Thacher, whom the Board invited to attend to address any issues that arose specifically relating to Blackstone. After discussion of the day’s events and consideration of various alternatives, the Board authorized Mr. Wallace to present a counter-proposal whereby the per share cash consideration to be paid to stockholders of Vivint Solar would be reduced by $2.00, to $7.89, with a $0.75 increase in stock consideration, with such additional stock consideration based on a trading price determined at the time of closing without reference to a collar mechanism and with a reduction in the maturity of the convertible notes from five years after issuance to three years. The Board also discussed its fiduciary duties with respect to the valuation of the stock consideration and convertible note consideration for purposes of the Reallocation of cash consideration to Vivint Solar stockholders other than 313, and returned to its previous discussion of whether to appoint a special committee to evaluate the potential differential consideration to be received by 313 in the deal. The Board also instructed Wilson Sonsini to begin drafting an amendment to the Merger Agreement reflecting the discussed terms and instructed Wilson Sonsini and Simpson Thacher to continue drafting the term sheet.

 

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Following the Board meeting, Mr. Wallace contacted Mr. Chatila to inform him of Vivint Solar’s counterproposal. Later that same day, Mr. Chatila accepted Vivint Solar’s counterproposal as the basis to proceed with further negotiations.

On November 6, 2015, the Board met to further discuss the potential Reallocation of cash consideration. At the invitation of the Board, representatives of Vivint Solar’s management and Wilson Sonsini attended the meeting. Also in attendance were representatives of Simpson Thacher, whom the Board invited to attend to address any issues that arose specifically relating to Blackstone. The Board discussed the benefits and consequences of a potential transaction in which 313 would receive different consideration from the public stockholders, as contemplated by the Reallocation. In connection with this discussion, the Board considered the risks associated with a transaction structure that required SunEdison to obtain the effectiveness of the Proxy/S-4, the potential delays associated with obtaining an effective Proxy/S-4, Vivint Solar’s cash needs in the immediate future, and the risk that if the transaction did not close by March 18, 2016, SunEdison’s committed financing would expire. The Board determined that it would be advisable to retain an independent financial advisor to evaluate the fairness to Vivint Solar’s public stockholders of any transaction with Reallocation, but further noted the potential challenges of engaging and receiving an opinion from an independent financial advisor on an accelerated timeline. Given the desire of all parties, in the event that the Proxy/S-4 would be required to be filed, to come to a resolution quickly so that the Proxy/S-4 could be declared effective in time for a closing prior to the expiration of the financing commitments, the Board concluded that the determination of whether or not a Reallocation of merger consideration should be made, and the pricing of the per share stock consideration and per share note consideration pursuant any such Reallocation, should both be deferred until after the signing of the amendment to the Merger Agreement, and that the amendment would reflect an option that could be exercised in Vivint Solar’s sole discretion to effect the Reallocation at such later time, such option being referred to as the “Reallocation Option.”

Following the Board meeting, Wilson Sonsini delivered to SunEdison a term sheet reflecting a reduction of the per share cash consideration to $7.89, the same per share convertible note consideration as agreed to at the signing of the Merger Agreement (except that the maturity of such convertible notes were three years instead of five years), the same per share stock consideration of $3.31 subject to the existing collar mechanism (which per share stock consideration, if determined as of the last trading day prior to November 6, 2015, would equal 0.120 shares of SunEdison common stock), and an additional $0.75 in per share stock consideration which would be valued based on a 5-day trailing volume weighted average trading price of SunEdison’s common stock at the time of closing. The term sheet also provided for the Reallocation Option. With the goal of increasing closing certainty, the term sheet also provided for a reduction in Vivint Solar’s obligation to meet certain closing conditions including the absence of any continuing material adverse effect concerning the business, assets, liabilities, operations or financial condition of Vivint Solar, the extension of the termination date of the Merger Agreement to June 30, 2016, two forms of liquidated damages payable by SunEdison in different circumstance in an amount totaling $300 million, and the stipulation that in the event of a willful breach of the Merger Agreement, damages would be calculated based on the terms of the original Merger Agreement prior to its amendment. The term sheet also included provisions requiring SunEdison to enter into a registration rights agreement to register the convertible note and stock consideration to be issued to 313 in the event the Reallocation Option is exercised, to agree to certain revisions to the Voting Agreement and to agree to terminate the lock-up agreement previously entered into by 313 in connection with the original Merger Agreement. In addition, the term sheet contemplated that consent for the amendment be obtained from the lenders under SunEdison’s debt financing commitments and from the purchaser in the TERP Acquisition and provided that Vivint Solar would be able to solicit offers from third-parties to enter into alternative transactions until the receipt of the stockholder approval and that any termination fee payable by Vivint Solar would be reduced. Simultaneously, Wilson Sonsini and Simpson Thacher began to work on the definitive documents for such a revised transaction.

On the morning of November 7, 2015, representatives of Wilson Sonsini, Simpson Thacher and Kirkland & Ellis engaged in discussions on the term sheet. Representatives of Kirkland & Ellis indicated that they were

 

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advised by SunEdison that an extension of the termination date to June 30, 2016 and the removal of the closing condition that there has been no material adverse effect on Vivint Solar since July 20, 2015 would result in SunEdison not being able to obtain its lenders’ consent to the amendment. After further discussions among representatives of Wilson Sonsini, Simpson Thacher, management of Vivint Solar and certain members of the Board, it was determined that, since lender consent would be required for SunEdison to execute the amendment, the termination date would not be extended and the removal of the closing condition that there be no material adverse effect would be further discussed with SunEdison. Later that day, Wilson Sonsini delivered a first draft of the amendment to the Merger Agreement to Kirkland & Ellis reflecting the terms in the term sheet and the discussions from that morning.

Over the next several days, representatives of SunEdison, Vivint Solar, Kirkland & Ellis and Wilson Sonsini worked to negotiate the terms of the amendment and address certain other outstanding issues, including certain consents under the interim operating covenants in the Merger Agreement. Drafts of the other ancillary agreements were also exchanged and discussed. Morgan Stanley was asked to conduct a financial analysis of the proposed merger consideration to be received by stockholders of Vivint Solar (other than any such holder entering into the Voting Agreement) in the proposed renegotiated transaction.

On November 9, 2015, Kirkland & Ellis delivered a revised draft of the Merger Agreement amendment to Wilson Sonsini. The revised draft accepted the revised consideration (except on the reduction of the maturity date of the convertible notes from five to three years), the Reallocation Option, the ability of Vivint Solar to solicit proposals for alternative transactions from third-parties, and the ability of Vivint Solar to seek damages under the original Merger Agreement in the event of SunEdison’s willful breach of the amended Merger Agreement. The draft further proposed a reduction of the termination fee to $56,000,000, rejected the reduction of certain closing conditions, provided that the closing condition that there be no material adverse effect on Vivint Solar be measured from the date of the execution of the amendment, and indicated that the new liquidated damages provisions were subject to further review and discussion.

On that same day, Mr. Chatila communicated to Mr. Wallace that consent from the lenders under the debt financing commitments was expected but would not be forthcoming until at least the following day.

Later in the day on November 9, 2015, the Board held a special meeting to discuss the status of negotiations. At the invitation of the Board, representatives of Vivint Solar’s management and Wilson Sonsini attended the meeting. Also in attendance were representatives of Simpson Thacher, whom the Board invited to attend to address any issues that arose specifically relating to Blackstone. The Board determined not to deliver additional drafts of documents to SunEdison until receipt of comments from the lenders and the purchaser under the TERP Acquisition agreement or until consent of those parties was guaranteed on a certain timetable. Regarding the terms of the amendment, the Board resolved to propose a termination fee payable by Vivint Solar equal to 3.0% of the value of the revised aggregate consideration in the proposed transaction (taking into account the drop in SunEdison’s stock price, which had closed at $7.40 per share that day, and the estimated market value of the convertible notes).

On November 10, 2015, SunEdison announced its earnings during a premarket call. During this announcement, Mr. Chatila stated that SunEdison had a signed agreement with VSLR and intended to abide by its terms.

Over the next several days, SunEdison informed Vivint Solar that it was continuing to work with its lenders to obtain their consent to the revised transaction, but that getting such consent would require additional time. On November 12, 2015, representatives of SunEdison, in accordance with the Merger Agreement, notified Vivint Solar that the TERP financing commitment was reduced by approximately $114.5 million in connection with cash proceeds received by TerraForm in connection with a debt facility of one of its subsidiaries. During those same several days, the price per share of SunEdison’s stock decreased significantly, closing at $4.93 per share on November 13, 2015.

 

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On November 15, 2015, representatives of SunEdison informed representatives of Vivint Solar that it expected to shortly obtain the consent of the lenders under the debt financing commitments and the purchaser under the TERP Acquisition agreement to the amendment of the Merger Agreement. The representatives of SunEdison also indicated that the debt financing commitments would be amended in connection with the renegotiated transaction. On that same day, representatives of Vivint Solar delivered a draft of the amendment to the Merger Agreement to Kirkland & Ellis that provided for a termination fee payable by Vivint Solar of $34,000,000 (which was approximately 3.0% of the value of the revised aggregate consideration in the transaction taking into account the drop in SunEdison’s stock price as of November 13, 2015 and the estimated market value of the convertible notes) and that accepted several of the changes made to the prior revised draft sent by Kirkland & Ellis, including the removal of the liquidated damages provision and that the closing condition that there be no material adverse effect on Vivint Solar would be measured from the date of the execution of the Amendment. Instead, Vivint Solar’s revised draft added a provision whereby a late filing of the Proxy/S-4, or the failure of the Proxy/S-4 to become effective or to be mailed by a certain date, would automatically result in a gradual increase in the per share cash merger consideration of $0.02 per day.

On November 16, 2015, representatives of Kirkland & Ellis distributed a revised draft of the amendment to the Merger Agreement to Wilson Sonsini, which confirmed that SunEdison had agreed to the revised Company Termination Fee, but indicated that the provisions increasing the merger consideration in the event that the S-4 was not filed or does not become effective on time, and several other provisions, including certain reductions to Vivint Solar’s obligations to satisfy other closing conditions, required further discussion. Representatives of SunEdison further indicated that it was still working to obtain consent from its lenders and the purchaser under the TERP Acquisition agreement to the amendment of the Merger Agreement, and while SunEdison still believed that such consent would be forthcoming shortly, SunEdison was still not in a position to share drafts of the revised debt commitment letters or the revised TERP Acquisition agreement that would address the amended transaction. Representatives of SunEdison and Vivint Solar agreed that the maturity date for the convertible notes would be four years, down from a five year term for the convertible notes under the original Merger Agreement.

On November 16, 2015, the Board held special meetings to discuss the status of the negotiations and to discuss SunEdison’s failure, as of that date, to obtain consent from its lenders and the purchaser under the TERP Acquisition agreement for any amendment to the Merger Agreement. At the invitation of the Board, representatives of Vivint Solar’s management and Wilson Sonsini attended each meeting, as did representatives of Simpson Thacher, whom the Board invited to attend to address any issues that arose specifically relating to Blackstone. At each of these meetings, the Board was updated as to the status of negotiations between the parties and the Board considered the fact that no drafts of amended financing commitments had been received. In light of SunEdison’s continued delays in obtaining amended financing commitments, the Board discussed potential alternative courses of action, including the commencement of legal proceedings seeking specific performance of the Merger Agreement. At the meeting on the afternoon of November 16, 2015, the Board considered its fiduciary obligations.

The Board also met on the morning and the evening of November 17, 2015 to receive further updates regarding the status of negotiations. At the invitation of the Board, representatives of Vivint Solar’s management and Wilson Sonsini attended each meeting, as did representatives of Simpson Thacher, whom the Board invited to attend to address any issues that arose specifically relating to Blackstone. At the meeting on the morning of November 17, 2015, the Board discussed its fiduciary obligations. The Board was also informed at that meeting that the approval of an independent committee of TerraForm Power was required before the purchaser under the TERP Acquisition agreement could consent to an amendment to the Merger Agreement and that SunEdison had not received such approval. The Board was further informed that SunEdison was continuing to work toward obtaining such approval from the purchaser under the TERP Acquisition agreement and the parties to SunEdison’s financing commitments.

At the Board’s invitation, representatives of Morgan Stanley attended the meeting on the evening of November 17, 2015. During that meeting, Vivint Solar’s management relayed to the Board that all

 

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communications from SunEdison had ceased during the middle of the day. Based on this information, the Board preliminarily decided to file litigation to seek specific performance of the terms of the original Merger Agreement. However, later on the evening of November 17, 2015, Mr. Wallace spoke to Mr. Chatila and Emmanuel T. Hernandez, chairman of the Board of SunEdison, to discuss the status of negotiations and Mr. Chatila reaffirmed SunEdison’s commitment to consummating the Merger pursuant to the proposed terms of a renegotiated transaction. Following this discussion, the Board reconvened and determined to continue to proceed with negotiations with SunEdison on the amendment to the Merger Agreement.

On November 18, 2015, representatives of SunEdison provided several updates regarding ongoing discussions between SunEdison, the commitment parties under the SunEdison financing commitment and the TERP financing commitment and the TerraForm Power special committee, indicating that discussions with such parties were ongoing and progressing.

During the following days, representatives of Wilson Sonsini, Simpson Thacher and Kirkland & Ellis continued to work to finalize the remaining outstanding issues on the amendment to the Merger Agreement (including the provisions on the closing conditions, the increase in cash consideration if the Proxy/S-4 is delayed, and other outstanding issues) and the various other ancillary documents for a renegotiated transaction.

On November 20, 2015, Mr. Chatila contacted Mr. Wallace to inform Mr. Wallace of certain changes in the composition of TerraForm Power’s board of directors, its special committee and management team that had been made and which would be announced before the opening of markets on November 23, 2015, including the dismissal of Mr. Domenech from his position as chief executive officer of TerraForm Power. As a result of these changes, Mr. Chatila indicated to Mr. Wallace that the negotiation of the proposed amended transaction terms would likely be delayed to give the new TerraForm Power board and its special committee the ability to consider the amended transaction terms. Mr. Chatila further indicated that SunEdison continued to discuss the revised transaction with the lenders and had not yet received their consent.

Later that same day, the Board held a special meeting at which it received an update on the progress of negotiations on the amendment to the Merger Agreement and the status of SunEdison’s attempts to obtain consent from the lenders under the debt financing commitments and the purchaser under the TERP Acquisition agreement. At the invitation of the Board, representatives of Vivint Solar’s management and Wilson Sonsini attended the meeting. Also in attendance were representatives of Simpson Thacher, whom the Board invited to attend to address any issues that arose specifically relating to Blackstone. Mr. Wallace provided an update to the Board regarding his discussion with Mr. Chatila earlier that day. Given the new uncertainty as to the timing of when SunEdison would be able to receive approval from TerraForm Power’s Board, the Board again considered the alternatives available to Vivint Solar, including whether or not to commence legal proceedings seeking specific performance of the Merger Agreement. The Board discussed at length whether filing litigation against SunEdison seeking specific performance of the Merger Agreement would place additional pressure on SunEdison to execute a renegotiated transaction expeditiously. The Board further considered its previous determination that a renegotiated transaction with SunEdison was the best possible outcome that was reasonably available to Vivint Solar’s stockholders. Following discussion, the Board decided to delay the potential filing of any litigation against SunEdison until the following week, when further information would be available regarding the effect of the management, directorship and special committee changes at TerraForm Power.

Over the next few days, the representatives of Vivint Solar awaited further updates on the progress of discussions between SunEdison, TerraForm Power and the parties to the committed financing.

On November 25, 2015, the Board held a special meeting to discuss the progress of negotiations on the amendment to the Merger Agreement and the status of SunEdison’s attempts to obtain consent from the lenders under the debt financing commitments and the purchaser under the TERP Acquisition agreement. At the invitation of the Board, representatives of Vivint Solar’s management and Wilson Sonsini attended the meeting. Also in attendance were representatives of Simpson Thacher, whom the Board invited to attend to address any

 

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issues that arose specifically relating to Blackstone. The Board again considered its alternative courses of action, including commencing legal proceedings seeking specific performance of the Merger Agreement. The Board reaffirmed its determination that a renegotiated transaction with SunEdison was in the best interest of Vivint Solar’s stockholders and decided not to proceed with litigation against SunEdison at that time. However, the Board authorized Mr. Wallace to convey to SunEdison the possibility of Vivint Solar immediately commencing legal action due to SunEdison’s delay in approving the revised transaction and the lack of communication regarding SunEdison’s discussions with its lenders and the purchaser under the TERP Acquisition agreement regarding their approval of the revised transaction. Later that day, Mr. Wallace delivered this message to Mr. Chatila, who did not respond immediately but indicated that he would to discuss such information internally.

Between November 25, 2015 and November 29, 2015, Mr. Gadhia provided several updates to representatives of Vivint Solar indicating that discussions with the commitment parties under the SunEdison financing commitment and the TERP financing commitment, the purchaser under the TERP Acquisition agreement and the special committee of TerraForm Power were ongoing and progressing, but that SunEdison could not provide any firm guarantees as to when or if such approvals would occur.

On November 30, 2015, based on the Board’s conversations at its previous meeting and the fact that Vivint Solar had not received any guarantees on timing from SunEdison for obtaining required approvals for a revised transaction, Vivint Solar’s management instructed Wilson Sonsini to file a complaint in the Delaware Court of Chancery seeking specific performance of the Merger Agreement after informing SunEdison of such decision. On that same day, Mr. Wallace and Mr. Chatila had a phone conversation, during which Mr. Wallace relayed Vivint Solar’s decision and Mr. Chatila informed Mr. Wallace that filing such litigation would be extremely harmful to SunEdison’s business and would greatly reduce the chances that any transaction with Vivint Solar would be consummated. Mr. Chatila further indicated his belief that SunEdison would be in a position to deliver revised documents from the purchaser in the TERP Acquisition and the lenders soon and that SunEdison remained committed to a transaction with Vivint Solar. Based on this conversation, Vivint Solar determined to defer the commencement of legal action, and an update was provided to the Board on such recent developments.

Later that same day, representatives of SunEdison delivered copies of revised documentation for the TERP Acquisition to Wilson Sonsini, which draft contained the agreement by the purchaser in the TERP Acquisition to the revised transaction and other changes to reflect the reduced consideration in the Merger. On that same day, a copy of the amendment to the debt financing commitment letter relating to the SunEdison financing commitment was delivered to Wilson Sonsini by representatives of SunEdison. On December 1, 2015, a further revised draft of the SunEdison debt financing commitment letter was delivered to Wilson Sonsini, which draft contained the agreement by the lenders thereto to the revised transaction and contemplated a reduction in the amount of the term facility to be provided to SunEdison to $300 million (such amount was $500 million in the original financing commitment). On December 2, 2015, a copy of the amendment to the debt financing commitment letter relating to the TERP financing commitment was delivered to Wilson Sonsini by representatives of SunEdison and TERP, which draft contained the acknowledgement and agreement by the lenders thereto to the revised transaction and which reflected a reduction in the amount of the bridge financing to be provided to purchaser in the TERP Acquisition.

During such time and over the next several days, representatives of Vivint Solar, SunEdison, Wilson Sonsini and Simpson Thacher worked together to review the proposed amendments to the financing commitment letters and the TERP Acquisition documents, including related agreements. During this same period, SunEdison continued to work with the lenders under the financing commitments and the independent committee of Terraform Power to finalize these amendments and obtain consent to the amendment of the Merger Agreement. The parties also worked together to finalize the terms of the amendment and the other ancillary agreements to the revised transaction.

In particular, given the fact that the time spent negotiating the amendment to the Merger Agreement had significantly decreased the period remaining prior to the expiry of the financing commitments, representatives of

 

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313 and Vivint Solar discussed with representatives of SunEdison the possibility of expediting the closing process and increasing closing certainty by effecting the amendment to the Merger Agreement using alternate methods that could immediately remove, upon the execution of the amendment, the requirement for a Proxy/S-4 filing. These alternate methods included one structure where 313 and the public stockholders would initially receive the same cash consideration in the transaction, but where SunEdison would have the option to substitute a portion of the cash provided to 313 with stock consideration and note consideration. Another structure was then proposed where the Reallocation was effected immediately upon signing. Both proposals were abandoned, due in part because of concerns raised by SunEdison that the need to obtain consent from the commitment parties to such restructuring could delay the execution of the amendment.

The Board held a special meeting on December 6, 2015 to consider the status of the potential transaction, receive updates on the potential transaction, and provide direction with respect to the ongoing negotiations. At the invitation of the Board, representatives of Vivint Solar’s management and Wilson Sonsini attended the meeting, as did representatives of Simpson Thacher, whom the Board invited to attend to address any issues that arose specifically relating to Blackstone. At this meeting, the Board reviewed the progress of negotiations over the course of the preceding weeks, and considered and discussed the alternative potential structures that had been discussed between counsel to Blackstone, Vivint Solar and SunEdison over the preceding days.

The Board also reviewed the agreements that had been reached between SunEdison and 313, including the waiver of the lock-up agreement, the Registration Rights Agreement to be entered into if the Reallocation Option were exercised and the provision to SunEdison of the option to draw upon a $250,000,000 credit facility provided by 313. Representatives of Wilson Sonsini reviewed with the Board its fiduciary duties with respect to the transaction. The Board also considered whether the renegotiated transaction should be subjected to additional approvals, due to the fact that the consideration received by 313 could be different from the consideration received by the public stockholders, including whether the renegotiated transaction or the consideration of the Reallocation Option should be approved by a special committee or a majority of the public stockholders. The Board determined, as had been previously discussed, not to form a special committee, given the Board’s composition, and not to subject the transaction to the approval of a majority of the public stockholders. After further discussion, the Board determined that (i) 313 agreed to accept different consideration solely to enhance closing certainty in light of the timing restrictions created by the fact that SunEdison’s financing commitments expire on March 18, 2016, (ii) the public stockholders would be receiving increased liquidity and less exposure to the volatility of SunEdison’s stock consideration and convertible note consideration in the Reallocation, which 313 would prefer absent the decreased closing certainty inherent in a transaction without the Reallocation and (iii) as such, the interests of the public stockholders and 313 were aligned even if the Reallocation Option was exercised. Based on such reasons and other reasons considered by the Board, the Board determined that in anticipation of receiving an additional opinion from an independent financial adviser on the fairness of the relative values of the additional cash consideration to be received by the public stockholders in a Reallocation versus the additional note and stock consideration to be received by 313 in a Reallocation, the Board as a whole would need to assess whether the exercise of the Reallocation Option would be in the best interest of Vivint Solar’s stockholders.

Following these discussions, the Board reaffirmed its previous determinations that Vivint Solar should pursue a renegotiated transaction with SunEdison because the consummation of the Merger, even at a reduced price, provided a better outcome for Vivint Solar stockholders than any alternative reasonably available, including litigation (especially considering the risk that litigation would either delay the closing of the transaction or result in the failure of the transaction to close). The Board also reaffirmed its previous determination that acceptance of the renegotiated transaction was, in the estimation of the Board, necessary to make the consummation of any transaction with SunEdison probable or even possible. The Board also determined that the renegotiated transaction would include the Reallocation Option as had been previously discussed.

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provide an opinion as to the fairness of the Reallocation Option to the public stockholders. The Board discussed the retention of Duff & Phelps, LLC (“Duff & Phelps”) as a potential independent financial advisor to render an opinion regarding the fairness of the value of the additional cash consideration to be received by the public stockholders in a Reallocation relative to the additional note and stock consideration to be received by 313 in a Reallocation. The Board also discussed the terms of a potential engagement letter had been negotiated with Duff & Phelps for the Board’s review, including the retainer and opinion fees to be paid to Duffs & Phelps regardless of whether the Merger closed. The Board also considered the fact that Duff & Phelps had received, in the past two years, fees of approximately $2 million from SunEdison, and $5.6 million in fees, an amount constituting less than 0.5% of Duff & Phelps’ revenues over that same time period, from affiliates of Blackstone. Following discussion, the Board determined to proceed with the engagement of Duff & Phelps.

The Board then met twice on December 7, 2015 to consider the progress of and provide direction with respect to the ongoing negotiations. At the invitation of the Board, representatives of Vivint Solar’s management and Wilson Sonsini attended both meetings, representatives of Morgan Stanley attended the first meeting, and representatives of Simpson Thacher, whom the Board invited to attend to address any issues that arose specifically relating to Blackstone, attended the first meeting.

On the evening of December 8, 2015 through to early morning on December 9, 2015, representatives of SunEdison, Vivint Solar, Wilson Sonsini, Simpson Thacher and Kirkland & Ellis worked together to finalize all the definitive documents for a revised transaction and representatives of SunEdison indicated that it had received the approval of the TerraForm special committee and SunEdison’s board of directors for such finalized documents.

On the morning of December 9, 2015, the Board held a meeting to consider the terms of the proposed strategic transaction. At the invitation of the Board, representatives of Vivint Solar’s management, Wilson Sonsini and Morgan Stanley attended the meeting. Also in attendance were representatives of Simpson Thacher, whom the Board invited to attend to address any issues that arose specifically relating to Blackstone. The Board reviewed in detail the material terms of the amendment to the Merger Agreement and the transactions to be entered into by 313 in connection with the amendment, including the optional credit facility to be provided to SunEdison by an affiliate of 313, an amendment to the Voting Agreement executed by 313, the Registration Rights Agreement to be entered into by 313, and the termination of the Lockup Agreement into which 313 had entered in connection with the Merger Agreement. The Board also reviewed its fiduciary obligations in connection with the proposed acquisition with Wilson Sonsini.

A representative of Morgan Stanley then reviewed and discussed with the Board its financial analysis of the merger consideration under the amendment to the Merger Agreement, without giving effect to the Reallocation Option. At the request of the Board, Morgan Stanley delivered its oral opinion, which was subsequently confirmed in writing, to the effect that, as of that date and based on and subject to the assumptions, qualifications, limitations and other matters considered in connection with the preparation of the opinion, the per share merger consideration to be received by holders of Vivint Solar’s common stock (other than any such holder entering into the Voting Agreement), after giving effect to the amendment to the Merger Agreement and solely in the event that Vivint Solar did not exercise the Reallocation Option, was fair, from a financial point of view, to such holders.

Following discussion, the Board (i) unanimously determined that the terms of the Merger and Merger Agreement, after giving effect to the amendment to the Merger Agreement, are advisable, fair to and in the best interests of Vivint Solar and its stockholders, and that the entry into the amendment to the Merger Agreement and consummation of the Merger and all of the other transactions contemplated by the Merger Agreement are in the best interests of Vivint Solar and its stockholders, (ii) unanimously approved the Voting Agreement entered into by 313 and determined that the transactions contemplated by the Merger Agreement as well as the Voting Agreement would not be subject to the provisions of, or any restrictions under, the provisions of Section 203 of the DGCL, and (iii) unanimously recommended that Vivint Solar’s stockholders adopt the Merger Agreement, as

 

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amended by the amendment to the Merger Agreement, at a meeting of stockholders convened in accordance with the applicable provisions of Delaware law or, to the extent permitted under the Merger Agreement, by written consent.

On that same day, Vivint Solar and SunEdison executed the amendment to the Merger Agreement and SunEdison and 313 executed the amendment to the Voting Agreement, the Registration Rights Agreement and a commitment to provide the $250 million credit facility. Prior to the commencement of trading on the NYSE, the parties issued a press release announcing the amendment to the Merger Agreement.

On December 11, 2015, the Board held a special meeting to consider the exercise of the Reallocation Option. At the invitation of the Board, representatives of Vivint Solar’s management and Wilson Sonsini also attended the meeting. Representatives of Morgan Stanley and Duff & Phelps attended portions of the meeting. Also in attendance were representatives of Simpson Thacher, whom the Board invited to attend to address any issues that arose specifically relating to Blackstone.

The Board reviewed and discussed the terms of the Reallocation Option, including the formula for the calculation of the additional cash consideration to be paid to Vivint Solar stockholders under the Reallocation Option, based on the formulaically-determined fair market value of the stock consideration and the convertible note consideration as contemplated pursuant to the Merger Agreement. The Board also reviewed the notice proposed to be sent to SunEdison exercising such option, which contained such formula (the “Notice”), as described in the section of this proxy statement captioned “Summary—Merger Consideration.” At the request of the Board, Duff & Phelps presented its analysis of such formula. Duff & Phelps then delivered its opinion, which was subsequently confirmed in writing, that (1) the portion of the additional cash consideration payable to the public stockholders that would be attributable toward the convertible note consideration, relative to the convertible note consideration paid to 313 instead of cash, and (2) that portion of the additional cash consideration that would be attributable toward the stock consideration payable to the public stockholders, relative to the stock paid to 313 instead of cash, were fair from a financial point of view as of that date, to such holders other than 313 (without giving effect to any impact of the Merger on any particular stockholder other than in its capacity as a stockholder).

Morgan Stanley then reviewed with the Board its financial analysis of the implied merger consideration to be received by holders of Vivint Solar’s common stock (other than any such holder entering into the Voting Agreement), after giving effect to the amendment to the Merger Agreement and the exercise of the Reallocation Option. At the request of the Board, Morgan Stanley delivered its oral opinion, which was subsequently confirmed in writing, to the effect that, as of that date and based on and subject to the assumptions, qualifications, limitations and other matters considered in connection with the preparation of the opinion, the per share merger consideration to be received by holders of Vivint Solar’s common stock (other than any such holder entering into the Voting Agreement), after giving effect to the amendment to the Merger Agreement and the exercise by Vivint Solar of the Reallocation Option, was fair, from a financial point of view, to such holders.

After receipt of these oral opinions, the Board approved the exercise of the Reallocation Option.

At such meeting, Mr. Wallace disclosed to the Board that affiliates of Blackstone had been contacted by and/or have held discussions with affiliates of SunEdison regarding potential transactions involving parties on both sides, including potential transactions that SunEdison was arranging to improve its liquidity or to obtain financing and potential partnership opportunities for the purchase of assets.

At such meeting, the Board also discussed Vivint Solar’s ability pursuant to the amended Merger Agreement to solicit offers from third-parties to enter into an alternative transaction. Despite the fact that no potential buyers had engaged Vivint Solar in discussions since the original Merger Agreement was signed, the Board directed Morgan Stanley to contact certain other potentially interested parties to discuss a potential transaction with Vivint Solar. At the Board’s direction, Morgan Stanley has contacted eleven parties, each of whom were selected based on a review with the Board of a list of parties who were viewed as most likely to be interested in acquiring Vivint Solar’s business.

 

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On December 13, 2015, Vivint Solar delivered the Notice to SunEdison exercising the Reallocation Option and filed with the SEC a Current Report on Form 8-K on the morning of December 14, 2015, prior to the commencement of trading on the NYSE, disclosing the exercise of the Reallocation Option.

Financing

SunEdison and Merger Sub intend to finance the Cash Consideration primarily from the proceeds of the Term Facility and the TERP Acquisition, which are described below. If SunEdison is unable to obtain any portion of the financing described below and such portion is required to fund any portion of the Cash Consideration and any fees, expenses and other amounts contemplated by the Merger Agreement to be paid by SunEdison, Merger Sub or Vivint Solar as the surviving corporation, including the repayment of Vivint Solar’s outstanding working capital facility in an aggregate principal amount of $50.0 million and any indebtedness of Vivint Solar that will be due and payable at the closing of the Merger, SunEdison and Merger Sub will be obligated to take any and all actions necessary to obtain alternative financing in an amount sufficient to consummate the Merger and the transactions contemplated by the Merger Agreement, including any indebtedness of Vivint Solar that will be due and payable at the closing of the Merger. Notwithstanding the foregoing, SunEdison’s and Merger Sub’s obligations to consummate the Merger and the other transactions contemplated by the Merger Agreement are not conditioned upon their obtaining financing to pay the Cash Consideration or the consummation of the Term Facility, the TERP Acquisition or receipt of any other third-party financing.

In connection with the Merger Agreement Amendment, SunEdison entered into a second amended and restated debt commitment letter, dated as of December 9, 2015, with Goldman Sachs USA, Barclays Bank PLC, Citigroup Global Markets, Inc. and UBS Securities LLC, pursuant to which, among other things, such institutions have committed to provide, subject to the terms and conditions thereof, the Term Facility, a $300 million secured term loan facility to the Term Borrower. SunEdison intends to transfer certain development assets of Vivint Solar and of SunEdison’s residential solar business to the Term Borrower on the date of the consummation of the Merger. The Term Facility will be guaranteed by the immediate parent of the Term Borrower (a wholly-owned subsidiary of SunEdison) and all of the Term Borrower’s domestic subsidiaries, and will be secured by substantially all assets of the Term Borrower and such guarantors. The funding of the Term Facility is subject to customary conditions, including the negotiation of definitive documentation and other customary closing conditions.

In addition, on December 9, 2015, in connection with its entry into the Merger Agreement Amendment, SunEdison entered into the TERP Purchase Agreement with its controlled affiliate pursuant to which, substantially concurrently with the consummation of the Merger, SunEdison has agreed to sell to Terra LLC the equity interests in the Purchased Subsidiaries in exchange for the TERP Cash Consideration equal to the product of (i) the lesser of (x) the actual installed capacity (in megawatts) of the residential solar operating systems owned by the Purchased Subsidiaries on the Closing Date and (y) 523 MW, multiplied by (ii) $1,700,000, to be paid concurrently with the consummation of the Merger. SunEdison expects that the TERP Cash Consideration will be approximately $799 million based on the number of installed megawatts expected to be delivered at closing (currently expected to be approximately 470 MW).

Pursuant to the TERP Purchase Agreement, Terra LLC may, at its option, choose to assume (or have a subsidiary of Terra LLC assume) the obligations under the Aggregation Facility or any additional or other Indebtedness that is secured by direct or indirect interests in the Purchased Subsidiaries and that supplements, refinances or replaces the Aggregation Facility. To the extent obligations under any Indebtedness are assumed by Terra LLC (or a subsidiary of Terra LLC) on or before the consummation of the TERP Acquisition, then the TERP Cash Consideration will be reduced on a dollar-for-dollar basis by an amount equal to the then outstanding aggregate amount of the Indebtedness so assumed. If any Purchased Subsidiary is obligated to repay any such Indebtedness and such Indebtedness remains outstanding as of the consummation of the TERP Acquisition, such Indebtedness will be deemed to have been assumed by Terra LLC. At the consummation of the TERP

 

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Acquisition, a portion of the TERP Cash Consideration, estimated to be up to $75,000,000, may be placed into escrow and be unavailable to SunEdison to fund its payment obligations under the Merger Agreement. The TERP Purchase Agreement contains customary representations, warranties, covenants and conditions. The TERP Purchase Agreement is attached hereto as Annex E.

The TERP Purchase Agreement is not conditioned on Terra LLC’s receipt of any third-party financing. Terra LLC intends to finance the TERP Acquisition with existing cash, availability under the revolving credit facility of TerraForm Operating, a controlled affiliate of SunEdison and controlled subsidiary of TerraForm Power and the assumption or incurrence of project-level debt. In addition, in connection with the TERP Purchase Agreement, TerraForm Operating has entered into a second amended and restated debt commitment letter, dated as of December 9, 2015, with the Bridge Lenders, pursuant to which, among other things, the Bridge Lenders have committed to provide, subject to the terms and conditions thereof, borrowings under the “Bridge Financing Commitment. As of December 9, 2015, the Bridge Financing Commitment was reduced by $236.5 million based upon the principal amount outstanding and aggregate commitments available to be drawn under the Aggregation Facility, which is expected to be assumed by Terra LLC (or its subsidiary). Furthermore, the Bridge Financing Commitment is expected to be reduced by any increase in the commitments available to be drawn and actual borrowings under the Aggregation Facility occurring after December 9, 2015 and on or prior to the Effective Time. In addition, the Bridge Financing Commitment is required to be reduced by the release from escrow of certain project level reserves associated with TERP LLC’s assets in the United Kingdom, which are expected to be approximately $24 million and which were funded using a portion of the net proceeds from the GBP 313.5 million credit facility entered into by a subsidiary of TerraForm Operating on November 6, 2015. The funding of the Bridge Financing Commitment, as it may be reduced from time to time as described in this paragraph and in the associated commitment documents, is subject to the negotiation of definitive documentation and other customary closing conditions.

On December 9, 2015, SunEdison entered into the TERP Letter Agreement with Terra LLC, pursuant to which, SunEdison, among other things, agreed to use its reasonable best efforts to sell to third-party purchaser(s): (a) the “cash” or “sponsor” equity position in tax equity partnership or funds for the acquisition of residential solar systems that Terra LLC will be obligated to purchase from the Term Borrower under the Take/Pay Agreement and (b) the Purchased Subsidiaries acquired from Vivint Solar that Terra LLC would otherwise be obligated to purchase under the TERP Purchase Agreement, in each case, subject to certain conditions, including that the Merger has been consummated (including that SunEdison has wired to the paying agent under the Merger Agreement the full cash portion of the Merger Consideration and has available cash funds to pay its other obligations in connection with the Merger). If any such third party purchase and sale agreement is for 100 MW or more, then SunEdison will be required to obtain the consent of the Corporate Governance and Conflicts Committee of the Board of Directors of TerraForm Power prior to the entry into any such agreement. If SunEdison, Vivint Solar or any of its subsidiaries enters into an agreement for the sale of any Purchased Subsidiary to a third-party purchaser other than TerraForm Power or any of its subsidiaries between the date of the TERP Letter Agreement and the consummation of the Merger, upon the consummation of the Merger, Terra LLC will be relieved of its obligations to purchase any such Purchased Subsidiary that Terra LLC did not acquire in connection with the consummation of the Merger. In addition, if the purchase price paid for a Purchased Subsidiary by any such third party purchaser(s) is less than the purchase price that Terra LLC would have otherwise been obligated to pay under the TERP Purchase Agreement, Terra LLC will not have any obligation to pay or reimburse SunEdison for any such shortfall amounts.

The TERP Letter Agreement further requires that SunEdison take certain actions to facilitate the repayment of the Term Facility by December 31, 2016 and that on December 31, 2016, SunEdison will repay the Term Facility in an amount equal to the lesser of (a) $25,000,000 and (b) the outstanding amount under the Term Facility as of such date. Furthermore, the TERP Letter Agreement provides that, concurrent with the closing of the Term Facility, SunEdison will make an equity contribution to the Term Borrower such that the Term Borrower will have at least $100 million cash on hand.

 

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Agreements Related to the Merger

Voting Agreement

Concurrently with the execution of the Merger Agreement Amendment, SunEdison, Merger Sub and 313, the holder of approximately 77% of the voting power of the outstanding shares of Vivint Solar common stock entitled to be cast at the Special Meeting of Stockholders, entered into the Voting Agreement, dated as of December 9, 2015, pursuant to which 313 has agreed, among other things, unless the Voting Agreement is terminated, either (a) to vote all shares of Vivint Solar common stock beneficially owned or subsequently acquired by 313 and any other voting securities of Vivint Solar or any securities convertible or exercisable into or exchangeable for Vivint Solar common stock subsequently acquired or otherwise beneficially owned by 313 over which 313 has voting power in favor of the adoption of the Merger Agreement and any related actions that are submitted for a stockholder vote pursuant to the Merger Agreement or in furtherance of the Merger or (b) to deliver a written consent, as the holder of a majority of the outstanding shares of Vivint Solar, approving and adopting the Merger Agreement and the transactions contemplated thereby, including the Merger. 313 has also agreed to vote such shares against any action or omission that would reasonably be expected to result in a material breach of the Merger Agreement by Vivint Solar, that would result in a failure to satisfy any of the conditions to the consummation of the Merger or that would or would reasonably be expected to prevent or materially delay the consummation of the Merger; provided that 313 may vote in favor of any Vivint Solar takeover proposal that is recommended by the Vivint Solar board of directors in accordance with the terms of the Merger Agreement, which Vivint Solar takeover proposal did not result from a breach of Section 4.03 of the Merger Agreement (regarding permitted solicitations).

In addition, pursuant to the Voting Agreement, 313 has agreed that until the termination of the Voting Agreement, it will not transfer any of its current equity interests or enter into any voting agreement, voting trust or similar agreement or arrangement or grant a proxy, consent, power of attorney or similar agreement.

The Voting Agreement will terminate upon the earliest to occur of: (i) the Effective Time; (ii) the termination of the Merger Agreement in accordance with its terms; (iii) a change in recommendation of the Vivint Solar board of directors with regard to a Vivint Solar takeover proposal or an “Intervening Event” (on terms described under the caption “The Merger Agreement—Takeover Proposals” beginning on page 141) that is made during the period beginning immediately following the execution and delivery of the original Voting Agreement on the date of the original Merger Agreement and ending on the date of receipt of the Vivint Solar stockholder approval; (iv) the entry without the prior written consent of 313 into a modification, waiver or amendment of any provision of the Merger agreement that reduces or changes the form of the Merger Consideration or otherwise adversely affects 313; and (v) March 18, 2016.

The Voting Agreement is attached as Annex F hereto and is incorporated by reference herein. This summary of the Voting Agreement is qualified in its entirety by reference to the full text of the Voting Agreement.

Management Services Agreement

In connection with the execution of the Merger Agreement, on October 19, 2015, SunEdison and Vivint Solar entered into the Management Services Agreement, pursuant to which SunEdison has agreed to provide corporate management, pricing and other advisory services relating to Vivint Solar’s sale and marketing of Vivint Solar’s SRECs in the forward market in exchange for the right, pursuant to the terms of the Management Services Agreement and until the termination of such agreement, to designate the counterparties to whom Vivint Solar should direct its SREC marketing and sales activities in the forward market. The Management Services Agreement will terminate upon the earliest to occur of the following: (a) either Vivint Solar or SunEdison provides 60 days’ prior written notice to the other party that it desires to terminate the Management Services Agreement for any reason, (b) the Merger Agreement terminates pursuant to the termination provisions in Section 7.01 thereof or (c) the Merger is consummated at the Effective Time pursuant to the terms of the Merger Agreement.

 

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The Management Services Agreement is attached as Annex H hereto and is incorporated by reference herein. This summary of the Management Services Agreement is qualified in its entirety by reference to the full text of the Management Services Agreement.

Registration Rights Agreement

Concurrently with the execution of the Merger Agreement Amendment, SunEdison and 313 entered into the Registration Rights Agreement dated as of December 9, 2015, pursuant to which, subject to the terms thereof, SunEdison has granted certain registration rights in favor of 313.

Pursuant to the Registration Rights Agreement, among other things, as promptly as practicable and in no event later than the closing date of the Merger, SunEdison has agreed to use its commercially reasonable efforts to file with the SEC a shelf registration statement, and any amendments necessary thereto, relating to the offer and sale by 313 on a continuous basis of the shares of SunEdison common stock and the Convertible Notes it receives as Merger Consideration in the Merger and to keep such shelf registration statement effective for a period of two years from the Closing Date or such shorter period that will terminate when all such securities have been sold, cease to be outstanding or are no longer registrable securities; provided that an existing registration statement filed with the SEC will satisfy the preceding requirement so long as a prospectus supplement is filed relating to such offer and sale. If at any time, SunEdison is not eligible to utilize a shelf registration statement, upon demand from 313, SunEdison will facilitate as described in the Registration Rights Agreement an underwritten non-shelf registered offering. 313 will also be entitled to participate in certain registered offerings by SunEdison, subject to the restrictions in the Registration Rights Agreement.

Subject to certain conditions, if a shelf registration statement is not effective by the Closing Date and a non-shelf registration statement has not been filed, SunEdison will be required to pay to 313 (x) on the Closing Date, an amount equal to $5 million in cash and (y) on the last business day of each calendar week after the week in which the Closing Date occurs, an additional $250,000, if as of the opening of business on such business day, such default is continuing. Subject to certain conditions, if a shelf registration statement ceases to be effective or usable and registrable securities are outstanding for a period of time that exceeds 30 days in the aggregate in any 12-month period in which it is required to be effective and the sale of the registrable securities is not covered by another effective registration statement, SunEdison will be required to pay to 313 on a daily basis an amount equal to $50,000 per business day for each business day that such default is continuing until such default ends.

The Registration Rights Agreement is attached as Annex G hereto and is incorporated by reference herein. This summary of the Registration Rights Agreement is qualified in its entirety by reference to the full text of the Registration Rights Agreement.

Letter Agreement Regarding Intercompany Agreements

Pursuant to certain Intercompany Agreements, Vivint Solar and Vivint, Inc., Vivint Solar’s affiliated company and a wholly-owned indirect subsidiary of 313, and/or their respective affiliates provide certain rights, licenses and/or services to each other in order to facilitate Vivint Solar’s transition from Vivint, Inc. Concurrently and in connection with the execution of the Merger Agreement, SunEdison, Vivint, Inc. and Vivint Solar entered into the Letter Agreement, pursuant to which the parties have agreed to meet to, in good faith, discuss a transition plan effective as of the consummation of the Merger and negotiate and amend and restate certain of the Intercompany Agreements to permit Vivint Solar restate and in certain cases expedite Vivint Solar’s transition from its dependencies with Vivint, Inc., including with respect to the information technology systems, intellectual property and other assets and resources that are necessary for the conduct of its business in a manner consistent with past practice. The parties also agreed, among other things, to (i) subject to the finalization and execution of a transitional trademark license regarding Vivint Solar’s continued use of the “Vivint Solar” trademark for a limited duration for purposes of phase-out use following the consummation of the Merger, terminate the Trademark License Agreement between Vivint Solar Licensing, LLC and Vivint Solar, dated

 

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September 30, 2014, (ii) terminate the Product Development and Supply Agreement between Vivint Solar Developer and Vivint, Inc., dated September 30, 2014, (iii) terminate the covenants of non-competition in the Non-Competition Agreement between Vivint Solar and Vivint, Inc., dated September 30, 2014 and (iv) terminate Schedule #3 to the Marketing and Customer Relations Agreement between Vivint Developer and Vivint, Inc., dated September 30, 2014, in each case effective as of the consummation of the Merger. SunEdison is in the process of negotiating a non-competition agreement with Vivint, Inc.

The Letter Agreement will continue until the earliest to occur of: (a) the last of the Intercompany Agreements terminates or is amended and restated by the parties thereto pursuant to the Letter Agreement, (b) 24 months after the consummation of the Merger and (c) termination of the Merger Agreement (unless the Letter Agreement is earlier terminated by mutual written agreement of the parties thereto).

This summary of the Letter Agreement is qualified in its entirety by reference to the full text of the Letter Agreement, which is incorporated by reference herein.

Recommendation of Vivint Solar’s Board of Directors; Reasons for Vivint Solar’s Board of Directors’ Recommendation

Vivint Solar’s board of directors, at a meeting held on July 19, 2015, unanimously:

 

    approved the original Merger Agreement, the Merger and all of the other transactions contemplated by the original Merger Agreement on the terms and conditions set forth in the original Merger Agreement;

 

    determined that the terms of the Merger (as provided in the original Merger Agreement) and the original Merger Agreement are advisable, fair to and in the best interests of Vivint Solar and its stockholders, and that the entry into the original Merger Agreement and consummation of the Merger and all of the other transactions contemplated by the original Merger Agreement are in the best interests of Vivint Solar and its stockholders;

 

    directed that adoption of the original Merger Agreement be submitted to a vote at a special meeting of the Vivint Solar stockholders; and

 

    recommended that the Vivint Solar stockholders adopt the original Merger Agreement at the special meeting of the Vivint Solar stockholders.

At a meeting held on December 9, 2015, Vivint Solar’s board of directors unanimously approved the Merger Agreement Amendment and reaffirmed the determinations described above with respect to the Merger Agreement, as amended by the Merger Agreement Amendment .

At a meeting held on December 11, 2015, Vivint Solar’s board of directors unanimously determined to exercise the option, with the consent of the Vivint Solar’s controlling stockholder, 313, to elect to have each Public Share receive an amount of cash equal to (1) an amount in cash equal to $7.89 without interest, plus (2) an additional amount in cash that represents the Company’s determination (as approved by Vivint Solar’s board of directors in consultation with outside counsel and an independent financial advisor) of the fair market value of the amount of Stock Consideration and the amount of Note Consideration that would have otherwise been payable for each Public Share without the exercise of this option (the “Reallocation Option”).

Accordingly, Vivint Solar’s board of directors unanimously recommends that the Vivint Solar stockholders vote “FOR” the proposal to adopt the Merger Agreement.

In reaching its decision to approve the original Merger Agreement, the Merger Agreement Amendment and the transactions contemplated thereby, and to recommend that Vivint Solar stockholders approve the Merger and adopt the original Merger Agreement and the Merger Agreement Amendment, Vivint Solar’s board of directors consulted with Vivint Solar’s senior management and outside legal and financial advisors, considered

 

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alternatives to increase stockholder value and considered a number of factors that it believed supported its decision to enter into the Merger Agreement and consummate the Merger. Vivint Solar’s board of directors considered numerous factors weighing in favor of the Merger Agreement, including the following:

 

    the implied value of the per share Merger Consideration which, giving effect to the Merger Agreement Amendment, but without giving effect to the Reallocation Option, was estimated on December 9, 2015 by Morgan Stanley to be equal to $10.16 per share (a 21.1% premium over the closing price of Vivint Solar common stock on December 8, 2015, the last trading day prior to announcing the Merger Agreement Amendment);

 

    Vivint Solar’s board of directors’ belief that the terms of the Convertible Notes to be issued by SunEdison as part of the Merger Consideration are reasonable, in particular:

 

    that the Convertible Notes will constitute direct unsecured, senior obligations of SunEdison;

 

    that the Convertible Notes will bear interest at a rate of 2.25% per year, payable semiannually in arrears in cash; and

 

    that the Convertible Notes will mature on first day of the month to occur after the date that is four (4) years following the date of the closing of the Merger.

 

    that, if the Reallocation Option is not exercised, the Convertible Notes will be issued in a registered public offering under the Securities Act and listed on the NYSE, which could help create a market for such Convertible Notes that would allow holders of Vivint Solar common stock who wish to obtain liquidity with respect to their Merger Consideration the opportunity to do so;

 

    Vivint Solar’s board of directors’ view that the Merger would provide near-term value and liquidity to Vivint Solar’s stockholders;

 

    Vivint Solar’s board of directors’ thorough review and understanding of Vivint Solar’s business, financial performance (both past and prospective), financial condition, results of operations (both past and prospective), business operations, business and strategic objectives if it were to remain a standalone business, as well as the risks and challenges faced by Vivint Solar in accomplishing those objectives, earnings and prospects, including the competitive pressures facing Vivint Solar, the substantial financing needs of Vivint Solar, the challenges and opportunities facing the residential solar industry, and other risk factors set forth in Vivint Solar’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015, filed with the SEC on November 16, 2015, which is incorporated herein by reference;

 

    Vivint Solar’s board of directors’ view of the benefits of the Merger as compared to the possible alternatives to the Merger (including continuing to operate as a standalone business, or, following the execution of the original Merger Agreement, commencing legal proceedings against SunEdison to enforce the terms of the Merger Agreement prior to giving effect to the Merger Agreement Amendment, or agreeing to terminate the Merger Agreement and potentially seeking a settlement or commercial partnership with SunEdison or damages against SunEdison), the timing and likelihood of accomplishing the business plans and strategic objectives of those alternatives, and the potential benefits and risks of those alternatives, including the risks associated with those alternatives in light of industry- and Vivint Solar-specific dynamics and the risk that pursuing other potential alternatives could have resulted in the loss of an opportunity to consummate the contemplated transaction with SunEdison;

 

    the business reputation and capabilities of SunEdison and its management, which Vivint Solar’s board of directors believed supported the conclusion that a transaction with SunEdison on the terms as revised by the Merger Agreement Amendment could be completed in an orderly manner;

 

   

Vivint Solar’s board of directors’ consideration, prior to the execution of the original Merger Agreement, with the assistance of Vivint Solar’s management team and its financial advisors, that other

 

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third parties would likely not be interested in a transaction with Vivint Solar on the timeline necessary to maintain the availability of SunEdison’s offer or at a higher price;

 

    Vivint Solar’s board of directors’ consideration that, following the execution of the Merger Agreement Amendment, Vivint Solar would have the opportunity, during the Go-Shop Period, to directly or indirectly solicit, initiate, engage in negotiations with or furnish any non-public information regarding Vivint Solar or any of its subsidiaries to any third party in connection with or in response to a competing takeover proposal;

 

    Morgan Stanley’s oral opinion to Vivint Solar’s board of directors (which was confirmed in writing by delivery of Morgan Stanley’s written opinion dated December 9, 2015), with respect to the fairness, from a financial point of view, of the value of the per share Merger Consideration to be received by the holders of Vivint Solar common stock in the Merger, solely in the case that Vivint Solar’s Reallocation Option was not exercised, under the terms of the Merger Agreement as amended (other than any such holder entering into the Voting Agreement), as of December 9, 2015, based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Morgan Stanley in preparing its opinion. See “The Merger—Opinion of Vivint Solar’s Financial Advisors”;

 

    Vivint Solar’s board of directors’ estimation that the Merger under the revised terms of the Merger Agreement would likely be consummated and also would be more likely to be consummated than the Merger under the terms of the original Merger Agreement based on, among other things:

 

    the absence of a financing condition in the Merger Agreement and SunEdison’s obligation, in the event that SunEdison is unable to obtain the required amount from the planned financing, to take any and all actions necessary to obtain alternative financing in an amount sufficient to consummate the Merger and the transactions contemplated by the Merger Agreement;

 

    the likelihood and anticipated timing of consummating the Merger in light of the scope of the conditions to closing;

 

    the anticipated ability of SunEdison to obtain its contemplated financing for the Merger;

 

    that Vivint Solar is entitled to specific performance to prevent breaches of the Merger Agreement and to enforce specifically the terms of the Merger Agreement;

 

    the revised conditions to the closing set forth in the Merger Agreement Amendment, including (i) that the absence of any continuing material adverse effect concerning the business, assets, liabilities, operations or financial condition of Vivint Solar would be a condition to closing only with respect to any effects occurring after the date of the Merger Agreement Amendment and (ii) that Vivint Solar’s compliance with its agreements under the Merger Agreement is a condition to closing only to the extent that Vivint Solar did not intentionally failed to comply with such agreements;

 

    that, per the terms of the Merger Agreement Amendment, in the event that the Reallocation Option is not exercised, the failure of the Proxy/S-4 to be filed, become effective or to be mailed by certain dates, would automatically result in an gradual increase in the per share cash merger consideration of $0.02 per business day;

 

    that, per the terms of the Merger Agreement Amendment, under specified circumstances, if Vivint Solar terminates the Merger Agreement and SunEdison is proven to owe damages for a willful breach, then the termination of the Merger Agreement will not relieve SunEdison from any liability or damages payable by SunEdison, including payment for the benefits of the transactions contemplated by the original Merger Agreement (without giving effect to the economic terms of the Merger Agreement Amendment); and

 

   

that, per the terms of the Merger Agreement Amendment, if all of the conditions to the closing of the Merger have been satisfied (or waived, if capable of being waived) and SunEdison does not

 

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consummate the Merger when required under the terms of the Merger Agreement and Vivint Solar obtains a judicial determination that such failure to close was a breach of the Merger Agreement or SunEdison becomes subject to an order of specific performance directing SunEdison to consummate the transactions contemplated by the Merger Agreement, then the definition of Cash Consideration shall be automatically, without any further action by any party, increased such that Cash Consideration in the Merger Agreement will have the same meaning as “Cash Consideration” as defined in the original Merger Agreement and the other economic terms of the Merger Consideration in the Merger Agreement shall revert to the economic terms contained in the original Merger Agreement.

 

    other terms of the Merger Agreement, including:

 

    Vivint Solar’s board of directors’ belief that the terms of the Merger Agreement, including the parties’ mutual representations, warranties, covenants and closing conditions, are reasonable;

 

    the ability of Vivint Solar’s board of directors to withhold, withdraw, qualify or modify, or publicly propose to withhold, withdraw, qualify or modify, its recommendation that Vivint Solar’s stockholders adopt the Merger Agreement and the transactions contemplated thereby, in response to a competing acquisition proposal or an Intervening Event if, among other requirements more fully described in the Merger Agreement, Vivint Solar’s board of directors determines in good faith and after consultation with its outside legal and financial advisors that failure to take such action would be inconsistent with Vivint Solar’s board of directors fiduciary duties under applicable law and, in the case of a change of recommendation in response to a competing acquisition proposal, that such competing acquisition proposal constitutes a superior proposal;

 

    Vivint Solar’s ability to terminate the Merger Agreement in order to enter into a written definitive agreement providing for a superior proposal, provided that Vivint Solar complies with its obligations relating to the entering into of any such agreement and concurrently with the termination of the Merger Agreement pays to SunEdison a termination fee of $34.0 million;

 

    Vivint Solar’s board of directors’ belief that the other conditions under which the Merger Agreement could be terminated, and the termination fee in connection therewith, are reasonable;

 

    that 313, which holds approximately 77% of the outstanding shares of Vivint Solar, planned to enter into an agreement to vote all of its shares in favor of the adoption of the Merger Agreement and the transactions contemplated thereby and against any alternative takeover proposal or other action that would impede the consummation of the Merger; but that such Voting Agreement will terminate upon the earliest to occur of (i) the Effective Time, (ii) the date and time that the Merger Agreement is terminated in accordance with its terms, (iii) a change of recommendation by Vivint Solar’s board of directors with regard to an Intervening Event, (iv) the making of any change, amendment or modification by any party to, or waiver by Vivint Solar of, any provision of the Merger Agreement that reduces or changes the form of consideration payable pursuant to the Merger Agreement or that otherwise adversely affects 313, in each case without the prior written consent of 313, and (v) March 18, 2016;

 

    the covenants contained in the Merger Agreement obligating each of the parties to use reasonable best efforts to take all actions necessary to comply promptly with all legal requirements that may be imposed on it or its subsidiaries with respect to the closing of the Merger; and

 

    the availability of appraisal rights under the DGCL to Vivint Solar stockholders who comply with all of the required procedures under the DGCL, which allows such holders to seek appraisal of the fair value of their shares of Vivint Solar common stock as determined by the Delaware Court of Chancery;

 

    current financial market conditions and historical market prices, volatility and trading information with respect to Vivint Solar common stock; and

 

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    the fact that the original Merger Agreement was unanimously recommended by the Special Committee of Vivint Solar’s board of directors.

In the course of its deliberations, Vivint Solar’s board of directors also considered a variety of risks and other countervailing factors related to entering into the Merger Agreement, the Merger and all other transactions contemplated thereby, including but not limited to:

 

    the fact that the total value of the Merger Consideration in the Merger Agreement is less than the total value of the Merger Consideration in the original Merger Agreement;

 

    the fact that, prior to the execution of the Merger Agreement Amendment, SunEdison had not filed the Proxy/S-4;

 

    the fact that the price per share of SunEdison’s common stock had declined significantly, from a value of $31.66 per share on the day of signing the original Merger Agreement to $3.45 on December 8, 2015, the financial condition of SunEdison and the potential lack of access to capital markets that SunEdison may be experiencing;

 

    the fact that the number of shares of SunEdison common stock to be received by Vivint Solar’s stockholders will be determined at the time of the closing of the Merger and be subject to a collar, and that therefore the number of shares received by Vivint Solar stockholders in the Merger at closing will likely have less value than the expected value of the Stock Consideration as of the date that the Merger Agreement was signed and may have less value than the expected value of the Stock Consideration as of the date that the Merger Agreement Amendment was signed;

 

    the fact that the Merger may be delayed or not occur at all, including due to a failure of one or more closing conditions to be satisfied, in particular prior to the expiry of SunEdison’s committed financing;

 

    the fact that the financing contemplated by the financing commitments may not be available when the Merger is otherwise ready to close, and that SunEdison would then need to obtain alternative financing;

 

    the risks and costs to Vivint Solar if the Merger is delayed or does not occur at all, including the potential negative impact on Vivint Solar’s ability to retain key employees, raise sufficient capital to fund the operations and continued growth of Vivint Solar, the diversion of Vivint Solar management and employee attention and the potential disruptive effects on Vivint Solar’s day-to-day operations and Vivint Solar’s relationships with third parties;

 

    the restrictions on the conduct of Vivint Solar’s business prior to the consummation of the Merger, which may delay or prevent Vivint Solar from undertaking business opportunities that may arise or any other action it would otherwise take with respect to the operations of Vivint Solar pending consummation of the Merger, including that during the pendency of the Merger, Vivint Solar would have delayed any capital-raising activities necessary to ensure that Vivint Solar would have sufficient capital available to fund the operations and continued growth of Vivint Solar if the Merger is not consummated;

 

    the fact that a portion of the Merger Consideration to be received by Vivint Solar’s stockholders will consist of a Convertible Note subject to the terms of the Indenture, which Convertible Note is a newly-created security without an existing liquid trading market, and that the initial conversion price for the Convertible Note will be one hundred and forty percent (140%) of the Measurement Price, provided that the Measurement Price for such purpose does not exceed $33.62 and is not less than $27.51, and that such conversion price shall for such reason be no less than $38.51, over 11 times the closing price of Vivint Solar common stock on December 8, 2015, the last trading day prior to announcing the Merger Agreement;

 

   

the possibility that, if the Merger is not consummated, under certain circumstances Vivint Solar may be required to pay up to $15.0 million in SunEdison’s expenses or a termination fee of $34.0 million (with any payments made towards SunEdison’s expenses deducted from the amount required to be paid as a

 

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termination fee, as more fully described in the section entitled “The Merger Agreement—Termination Fees and Expenses” beginning on page 150 of this proxy statement and the section entitled “The Merger Agreement—Fees and Expenses” beginning on page 152 of this proxy statement), which could discourage other third parties from making an alternative takeover proposal with respect to Vivint Solar; and

 

    the potential tax consequences of the Merger for Vivint Solar’s stockholders, including that the receipt by certain holders of the Merger Consideration in exchange for Vivint Solar common stock in the Merger will be a taxable transaction for U.S. federal income tax purposes.

In addition, Vivint Solar’s board of directors was aware of and considered the interests of its directors and executive officers that are different from, or in addition to, the interests of Vivint Solar stockholders generally, including the treatment in the Merger of Vivint Solar stock options held by such directors and executive officers described in the section entitled “Interests of Vivint Solar’s Directors and Executive Officers in the Merger” beginning on page 119 of this proxy statement and SunEdison’s agreement to indemnify Vivint Solar directors and officers against certain claims and liabilities.

In reaching its decision to exercise the Reallocation Option, Vivint Solar’s board of directors consulted with Vivint Solar’s senior management and outside legal and financial advisors. Vivint Solar’s board of directors considered numerous factors weighing in favor of exercising the Reallocation Option, including the following:

 

    the determination by Vivint Solar’s board of directors that the cash the Public Stockholders will receive in the Merger, in exchange for the Note Consideration and Stock Consideration they would otherwise receive, pursuant to Vivint Solar’s exercise of its Reallocation Option in order to render the transaction an all-cash deal for such stockholders, is equal to the fair market value of such consideration;

 

    the determination by Vivint Solar’s board of directors that the Reallocation Option would enhance closing certainty in light of the fact that SunEdison would be required to draw on its committed financing in order to consummate the Merger but that such debt financing commitments expired on March 18, 2016 and that the Reallocation Option would facilitate a closing more quickly than would be the case if the SunEdison common stock and convertible notes otherwise issuable to the Vivint Solar stockholders other than 313 had to go through the SEC registration process that would have been required in connection with the Merger without the exercise of the Reallocation Option;

 

    the determination by Vivint Solar’s board of directors that 313 agreed to accept different consideration solely to enhance closing certainty, that the Public Stockholders would be receiving increased liquidity in the Reallocation Option (which 313 would prefer absent the decreased closing certainty inherent in a transaction without the Reallocation Option), and that the interests of the Public Stockholders and 313 were aligned even if the Reallocation Option was exercised;

 

    Morgan Stanley’s oral opinion to Vivint Solar’s board of directors (which was confirmed in writing by delivery of Morgan Stanley’s written opinion dated December 11, 2015), with respect to the fairness, from a financial point of view, of the value of the per share Merger Consideration to be received by the holders of Vivint Solar common stock in the Merger, in the case that Vivint Solar’s Reallocation Option was exercised, under the terms of the Merger Agreement as amended (other than any such holder entering into the Voting Agreement), as of December 11, 2015, based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Morgan Stanley in preparing its opinion. See “The Merger—Opinion of Vivint Solar’s Financial Advisors”;

 

   

Duff & Phelps’ oral opinion to Vivint Solar’s board of directors (which was confirmed in writing by delivery of Duff & Phelps’ written opinion dated December 13, 2015), with respect to the fairness, from a financial point of view, to the Public Stockholders, of (1) that portion of the aggregate Additional Cash Consideration payable to the Public Stockholders that would be attributable toward the convertible note consideration, relative to the convertible note consideration paid to 313 instead of

 

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cash, and (2) that portion of the aggregate Additional Cash Consideration that would be attributable toward the Stock Consideration payable to the Public Stockholders, relative to the Stock Consideration paid to 313 instead of cash, as of December 13, 2015, based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Duff & Phelpsin preparing its opinion. See “The Merger—Opinion of Vivint Solar’s Financial Advisors”.

The foregoing discussion of the information and factors that Vivint Solar’s board of directors considered is not intended to be exhaustive, but rather is meant to include the material factors that Vivint Solar’s board of directors considered. Vivint Solar’s board of directors collectively reached the conclusion to approve the Merger Agreement, the Merger and all of the other transactions contemplated by the Merger Agreement in light of the various factors described above and other factors that the members of Vivint Solar’s board of directors believed were appropriate. In view of the complexity and wide variety of factors, both positive and negative, that Vivint Solar’s board of directors considered in connection with its evaluation of the Merger, Vivint Solar’s board of directors did not find it practical, and did not attempt, to quantify, rank or otherwise assign relative weights or values to any of the factors it considered in reaching its decision and did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to the ultimate determination of Vivint Solar’s board of directors. Rather, in considering the various factors, individual members of Vivint Solar’s board of directors considered all of these factors as a whole and concluded, based on the totality of information presented to them and the investigation conducted by them, that, on balance, the positive factors outweighed the negative factors and that they supported a determination to approve the Merger Agreement, declare its advisability and recommend that the Vivint Solar stockholders vote to adopt the Merger Agreement. In considering the factors discussed above, individual directors may have given different weights to different factors.

Opinion of Vivint Solar’s Financial Advisors

Opinion of Morgan Stanley

Morgan Stanley was retained by Vivint Solar’s board of directors to act as its financial advisor and to provide it with one or more financial opinions in connection with the proposed Merger. Vivint Solar’s board of directors selected Morgan Stanley to act as its financial advisor based on Morgan Stanley’s qualifications, expertise and reputation and its knowledge of the industry, business and affairs of Vivint Solar. At the meeting of Vivint Solar’s board of directors on July 19, 2015, Morgan Stanley rendered an oral opinion to Vivint Solar’s board of directors, which was subsequently confirmed in writing on July 20, 2015, to the effect that, as of that date and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in its written opinion, the implied merger consideration of $16.50 per share of Vivint Solar common stock, which was obtained by adding the implied values of: (i) an amount in cash equal to $9.89 without interest, (ii) the principal amount of $3.30 of a Convertible Note and (iii) the number of shares of SunEdison common stock equal to the quotient obtained by dividing (x) $3.31 by (y) the volume weighted average price per share of SunEdison common stock (rounded down to the nearest cent) on the NYSE for the 30 consecutive trading days ending on (and including) the third trading day immediately prior to the Effective Time, and rounding to the nearest 1/100,000 of a share, provided that if the Measurement Price is less than $27.51, the exchange ratio will be 0.120 and if the Measurement Price is greater than $33.62, the exchange ratio will be 0.098 (collectively, the “Implied Initial Merger Consideration”), to be received by the holders of shares of Vivint Solar common stock (other than any such holder entering into the original Voting Agreement) pursuant to the original Merger Agreement] was fair from a financial point of view to such holders (the “Initial Opinion”).

At the meeting of Vivint Solar’s board of directors on December 9, 2015, Morgan Stanley rendered an oral opinion to Vivint Solar’s board of directors, which was subsequently confirmed in writing as of that same date, to the effect that, as of that date and based upon and subject to the assumptions made, procedures followed, matters

 

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considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in its written opinion, the implied merger consideration (based on the share price of SunEdison common stock as of December 8, 2015) of $10.16 per share of Vivint Solar common stock, which was obtained by adding: (i) an amount in cash equal to $7.89 without interest; (ii) the implied value of the principal amount of $3.30 per share of a Convertible Note of $1.14; and (iii) the implied value of the Stock Consideration per share and Additional Stock Consideration per share of $1.13 (collectively, the “Implied Pre-Notice Merger Consideration”), to be received by the holders of shares of Vivint Solar common stock (other than any such holder entering into the Voting Agreement) pursuant to the Merger Agreement (as amended by the Merger Agreement Amendment) was fair from a financial point of view to such holders (the “Pre-Notice Opinion”).

At the meeting of Vivint Solar’s board of directors on December 11, 2015, Morgan Stanley rendered an oral opinion to Vivint Solar’s board of directors, which was subsequently confirmed in writing as of that same date, to the effect that, as of that date and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in its written opinion, the implied merger consideration (based on the share price of SunEdison common stock as of December 10, 2015) of $10.68 per share of Vivint Solar common stock, which was obtained by adding: (i) $7.89 in cash plus (ii) the implied value of the Additional Cash Consideration of $2.79 (collectively, the “Implied Notice Merger Consideration”), to be received by the holders of shares of Vivint Solar common stock (other than any such holder entering into the Voting Agreement) pursuant to the Merger Agreement and the Notice was fair from a financial point of view to such holders (the “Notice Opinion”).

The full text of each of the Initial Opinion, the Pre-Notice Opinion and the Notice Opinion, which set forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering each of the Initial Opinion, the Pre-Notice Opinion and the Notice Opinion, as the case may be, are attached to this proxy statement as Annex J, Annex K, and Annex L, respectively. This summary of Morgan Stanley’s opinions is qualified in its entirety by reference to the full text of the opinions. You are encouraged to read Morgan Stanley’s opinions, this section and the summary of Morgan Stanley’s opinions below carefully and in their entirety. Morgan Stanley’s opinions were for the benefit of Vivint Solar’s board of directors, in its capacity as such, and addressed only the fairness from a financial point of view as of the dates of such opinions of the Implied Initial Merger Consideration, the Implied Pre-Notice Merger Consideration and Implied Notice Merger Consideration, as the case may be, to be received by the holders of shares of Vivint Solar common stock (other than any such holder entering into the Voting Agreement) pursuant to the Merger Agreement and, in the case of the Notice Opinion, the Notice as of the date of such opinion and did not address any other aspects or implications of the Merger. Morgan Stanley’s opinions were not intended to, and do not, constitute advice or a recommendation as to how Vivint Solar’s stockholders should vote at any stockholders’ meeting to be held (or execute a written consent in lieu of a meeting) in connection with the Merger or take any other action with respect to the Merger.

Initial Opinion

In connection with rendering the Initial Opinion, Morgan Stanley, among other things:

 

  1) reviewed certain publicly available financial statements and other business and financial information of Vivint Solar and SunEdison, respectively;

 

  2) reviewed certain internal financial statements and other financial and operating data concerning Vivint Solar and SunEdison, respectively;

 

  3) reviewed the financial projections prepared by the managements of Vivint Solar and SunEdison;

 

  4) discussed the past and current operations and financial condition and the prospects of Vivint Solar with senior executives of Vivint Solar and SunEdison, respectively;

 

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  5) reviewed the reported prices and trading activity for Vivint Solar common stock and the SunEdison common stock;

 

  6) compared the financial performance of Vivint Solar and the prices and trading activity of Vivint Solar common stock with that of certain other publicly traded companies Morgan Stanley deemed relevant;

 

  7) reviewed the financial terms, to the extent publicly available, of certain acquisition transactions Morgan Stanley deemed relevant;

 

  8) participated in certain discussions and negotiations among representatives of Vivint Solar and SunEdison and their financial and legal advisors;

 

  9) reviewed drafts of the original Merger Agreement, the original Voting Agreement, the original Indenture, and the debt commitment letters and certain related documents in connection with the Merger; and

 

  10) performed such other analyses and considered such other factors as Morgan Stanley deemed appropriate.

In arriving at the Initial Opinion, Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to it by Vivint Solar and SunEdison, and formed a substantial basis for the Initial Opinion. With respect to the financial projections, as well as certain extrapolations therefrom prepared with guidance from management of Vivint Solar and which have been approved for its use by management of Vivint Solar, Morgan Stanley assumed that they had been reasonably prepared on bases reflecting the best then currently available estimates and judgments of the respective managements of Vivint Solar and SunEdison of the future financial performance of Vivint Solar and SunEdison. Morgan Stanley was advised by Vivint Solar, and assumed, with Vivint Solar’s consent, that the financial projections and extrapolations therefrom were reasonable bases upon which to evaluate the business and financial prospects of Vivint Solar and SunEdison, respectively. In addition, Morgan Stanley assumed that the Merger would be consummated in accordance with the terms set forth in the original Merger Agreement without any waiver, amendment or delay of any terms or conditions, including, among other things, that SunEdison would obtain financing in accordance with the terms set forth in the debt commitment letters and that the final original Merger Agreement, original Voting Agreement, original Indenture and debt commitment letters would not differ in any material respect from the drafts thereof furnished to Morgan Stanley prior to the delivery of the Initial Opinion. Morgan Stanley assumed that in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the proposed Merger, no delays, limitations, conditions or restrictions would be imposed that would have a material adverse effect on the proposed Merger. Morgan Stanley is not a legal, tax, regulatory or actuarial advisor. Morgan Stanley is a financial advisor only and relied upon, without independent verification, the assessments of Vivint Solar and SunEdison and their legal, tax, regulatory or actuarial advisors with respect to legal, tax, regulatory or actuarial matters. Morgan Stanley expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of Vivint Solar’s officers, directors or employees, or any class of such persons, relative to the consideration to be received by the holders of shares of Vivint Solar common stock in the Merger and the Initial Opinion does not address the underlying business decision to effect the Merger or any other terms of the Merger. The Initial Opinion does not address the relative merits of the Merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available, nor does it address the underlying business decision of Vivint Solar to enter into the Merger Agreement. Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of Vivint Solar or SunEdison, nor was it furnished with any such valuations or appraisals. The Initial Opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it as of, July 20, 2015. Events occurring on or after such date may affect the Initial Opinion and the assumptions used in preparing it, and Morgan Stanley did not assume any obligation to update, revise or reaffirm the Initial Opinion.

 

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In arriving at the Initial Opinion, Morgan Stanley was not authorized to solicit, and did not solicit, interest from any party with respect to the acquisition, business combination or other extraordinary transaction involving Vivint Solar, nor did it negotiate with any parties, other than SunEdison, with respect to the possible acquisition of Vivint Solar or certain of its constituent businesses.

Summary of Financial Analyses

The following is a brief summary of the material financial analyses performed by Morgan Stanley in connection with its oral opinion and the preparation of its written opinion letter dated July 20, 2015. The various analyses summarized below were based on the closing price for the Vivint Solar common stock as of July 17, 2015, the last full trading day preceding the day of the special meeting of Vivint Solar’s board of directors to consider and approve, adopt and authorize the original Merger Agreement. The following summary is not a complete description of the Initial Opinion or the financial analyses performed and factors considered by Morgan Stanley in connection with the Initial Opinion, nor does the order of analyses described represent the relative importance or weight given to those analyses. The analyses described below must be considered as a whole; considering any portion of such analyses and of the factors considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying the Initial Opinion. Morgan Stanley considered a number of factors in analyzing the Implied Initial Merger Consideration. The fact that points in the ranges of implied equity value per share of Vivint Solar common stock derived below may be less than or greater than the Implied Initial Merger Consideration is not necessarily dispositive. Furthermore, mathematical analysis (such as determining the average or median) is not in itself a meaningful method of using the data referred to below.

Selected Company Analysis

Morgan Stanley reviewed certain financial information of Vivint Solar based upon Vivint Solar’s public filings and investor presentations and projections provided by Vivint Solar management with publicly available operating metrics for SolarCity Corporation (“SolarCity”), the public company that shared similar business characteristics to Vivint Solar based upon SolarCity’s public filings, investor presentations and research analyst reports.

For purposes of this analysis, Morgan Stanley observed the following statistics of SolarCity and Vivint Solar:

 

    the ratio of aggregate value, defined as market capitalization plus total debt less cash and cash equivalents, to estimated cumulative retained value, defined as discounted net cash flows from customers pursuant to long-term customer contracts net of estimated cash distributions to fund investors and estimated operating expenses for systems installed as of the measurement date for the period from October 1, 2014 through July 17, 2015 (based on estimates provided by Vivint Solar and SolarCity in their respective public filings); and

 

    the ratio of aggregate value to nominal contracted payments remaining, defined as the sum of the remaining contracted cash payments that customers are expected to pay over the term of their agreements for systems installed as of the measurement date for the period from October 1, 2014 through July 17, 2015 (based on estimates provided by Vivint Solar and SolarCity in their respective public filings).

Morgan Stanley then applied a representative range of financial multiples of SolarCity and Vivint Solar to the relevant Vivint Solar financial statistics based on estimates provided by Vivint Solar in its public filings. Applying a representative range of aggregate value to cumulative retained value ratios of 2.0x to 2.9x based on the 25th and 75th percentile range observed from October 1, 2014 through July 17, 2015, Morgan Stanley calculated an implied equity reference range per share of Vivint Solar common stock as of July 17, 2015 of

 

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$10.25 to $14.55, as compared to the Implied Initial Merger Consideration of $16.50 per share of Vivint Solar common stock. Applying a representative range of aggregate value to nominal contracted payments remaining ratios of 1.0x to 1.5x based on the 25th and 75th percentile range observed from October 1, 2014 through July 17, 2015, Morgan Stanley calculated an implied equity reference range per share of Vivint Solar common stock as of July 17, 2015 of $11.00 to $16.15, as compared to the Implied Initial Merger Consideration of $16.50 per share of Vivint Solar common stock.

SolarCity is not identical to Vivint Solar. In evaluating Vivint Solar, Morgan Stanley made judgments and assumptions with regard to industry performance, the impact of the two companies’ business models on their respective financial performance, general business, economic, market and financial conditions and other matters, which are beyond the control of Vivint Solar. These include, among other things, the impact of competition on the businesses of Vivint Solar, SunEdison and the industry generally, industry growth, and the absence of any material adverse change in the financial condition and prospects of Vivint Solar, SunEdison or the industry, or in the financial markets in general.

Portfolio Valuation Analysis

Morgan Stanley performed a portfolio valuation analysis of Vivint Solar to calculate an implied equity reference range per share of Vivint Solar common stock. Morgan Stanley utilized Vivint Solar management’s projections provided for years 2015 through 2017.

Morgan Stanley first calculated an estimated value of systems installed in each of the years 2015, 2016 and 2017 by discounting the projected future cash flows attributable to such installed systems in a given year to the end of that year. For example, the cash flows attributable to systems installed in 2016 were discounted to the end of 2016. The discount rate was chosen by Morgan Stanley based on prevailing interest rates and Morgan Stanley’s judgment of the estimated cost of capital for contracted cash flows associated with installed systems.

Morgan Stanley then subtracted estimated corporate expenses from the estimated value of systems installed to arrive at estimated total cash flow to equity for years 2015, 2016, and 2017. Estimated total cash flow to equity was discounted to a present value as of December 31, 2015 using a range of discount rates chosen by Morgan Stanley based on prevailing interest rates and Morgan Stanley’s judgment of Vivint Solar’s estimated cost of capital.

Morgan Stanley calculated a terminal value, assuming that Vivint Solar will continue to install new systems consistent with the estimated total cash flow to equity for Vivint Solar for 2017 for an additional 30 years after 2017 as per Vivint Solar management guidance and discounted this figure to a present value as of December 31, 2015 using a range of discount rates chosen by Morgan Stanley based on prevailing interest rates and Morgan Stanley’s judgment of Vivint Solar’s estimated cost of capital.

This analysis indicated an approximate implied equity reference range per share of Vivint Solar common stock of $12.55 to $14.30, as compared to the Implied Initial Merger Consideration of $16.50 per share of Vivint Solar common stock.

Precedent Transaction Analysis

Morgan Stanley compared the premia paid in the following 19 selected transactions since 2010 in the technology industry in which the target company was publicly traded and had an aggregate transaction value of $1,500,000,000—$2,500,000,000:

 

    Analog Devices, Inc. acquisition of Hittite Microwave Corporation

 

    GGC Software Holdings, Inc. acquisition of Lawson Software, Inc.

 

    Cypress Semiconductor Corporation acquisition of Spansion Inc.

 

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    Dell Inc. acquisition of Quest Software, Inc.

 

    EMC Corporation acquisition of Isilon Systems, Inc.

 

    Gibraltar Acquisition Corp. acquisition of GSI Commerce, Inc.

 

    Hewlett-Packard Company acquisition of 3PAR Inc.

 

    Hewlett-Packard Company acquisition of Palm, Inc.

 

    Infineon Technologies AG acquisition of International Rectifier Corporation

 

    Onyx Acquisition Corp. acquisition of Netezza Corporation

 

    Oracle Corporation acquisition of Acme Packet, Inc.

 

    Oracle Corporation acquisition of Taleo Corporation

 

    Providence Equity Partners, L.L.C. acquisition of Blackboard Inc.

 

    RedPrarie Corporation acquisition of JDA Software Group, Inc.

 

    RF Micro Devices, Inc. acquisition of TriQuint Semiconductor, Inc.

 

    Rhea Acquisition Corp. acquisition of RightNow Technologies, Inc.

 

    Safran SA acquisition of L-1 Identity Solutions, Inc.

 

    Thermo Fisher Scientific Inc. acquisition of Dionex Corporation

 

    Thoma Bravo, LLC acquisition of Compuware Corporation

Morgan Stanley noted that the median premium paid in the transactions reviewed was 35.3% over the closing stock price four weeks prior to the earliest of public announcement or market rumors of the applicable transaction. Based on this analysis and its professional judgment, Morgan Stanley applied a premium range of 20% to 50% to Vivint Solar’s closing stock price on July 17, 2015 of $10.88. The analysis indicated an approximate implied equity reference range per share of Vivint Solar common stock of $13.05 to $16.30.

No company or transaction utilized in the precedent transaction analyses is identical to Vivint Solar or the Merger. In evaluating the precedent transactions, Morgan Stanley made judgments and assumptions with regard to general business, market and financial conditions and other matters, which are beyond the control of Vivint Solar. These include, among other things, the impact of competition on the businesses of Vivint Solar, SunEdison or the industry generally, industry growth and the absence of any material adverse change in the financial condition of Vivint Solar, SunEdison or the industry or in the financial markets in general, which could affect the value of the companies and the aggregate value of the transactions to which they are being compared.

Additional Financial Statistics

Morgan Stanley also reviewed, for informational purposes, certain other financial statistics, in connection with the Initial Opinion as described below.

Trading Range Analysis

Morgan Stanley reviewed the range of closing prices of Vivint Solar common stock for various periods ending on July 17, 2015. Morgan Stanley observed the following:

 

Period Ending July 17, 2015

   Range of Closing Prices  

Last 30 Trading Days

   $ 10.15 – $14.10   

Trading days since the Vivint Solar’s October 1, 2014 Initial Public Offering

   $ 7.95 – $16.00   

 

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Morgan Stanley observed that the Implied Initial Merger Consideration pursuant to the Merger Agreement represents a 33.2% premium to the average closing price of shares of Vivint Solar common stock for the 30 trading days ending on July 17, 2015 and a 51.7% premium to the closing price of shares of Vivint Solar common stock on July 17, 2015.

Securities Research Analysts’ Price Targets

Morgan Stanley reviewed and analyzed future public market trading price targets for shares of Vivint Solar common stock prepared and published by equity research analysts. These targets reflect each analyst’s estimate of the future public market trading price of shares of Vivint Solar common stock. The range of discounted equity analyst price targets for the Vivint Solar common stock was $14.25 to $20.50. The discount rate chosen by Morgan Stanley was based on prevailing interest rates and Morgan Stanley’s judgment of Vivint Solar’s estimated cost of capital.

The public market trading price targets published by securities research analysts do not necessarily reflect current market trading prices for shares of Vivint Solar common stock and these estimates are subject to uncertainties, including the future financial performance of Vivint Solar and future financial market conditions.

Pre Notice Opinion

In connection with rendering the Pre-Notice Opinion, Morgan Stanley, among other things:

 

  1) reviewed certain publicly available financial statements and other business and financial information of Vivint Solar and SunEdison, respectively;

 

  2) reviewed certain internal financial statements and other financial and operating data concerning Vivint Solar and SunEdison, respectively;

 

  3) reviewed the financial projections prepared by the managements of Vivint Solar and SunEdison relating to Vivint Solar (the “Vivint Forecasts”) and SunEdison, respectively, and as adjusted by the respective managements of Vivint Solar (the “Adjusted Vivint Projections”) and SunEdison (the “Adjusted SunEdison Projections”), and discussed with the management of Vivint Solar its assessments as to the relative likelihood of achieving the future financial results in the Vivint Forecasts and the Vivint Adjusted Forecasts;

 

  4) discussed the past and current operations and financial condition and the prospects of Vivint Solar with senior executives of Vivint Solar and SunEdison, respectively;

 

  5) reviewed the reported prices and trading activity for Vivint Solar common stock and the SunEdison common stock;

 

  6) compared the financial performance of Vivint Solar and the prices and trading activity of Vivint Solar common stock with that of certain other publicly traded companies Morgan Stanley deemed relevant;

 

  7) participated in certain discussions and negotiations among representatives of Vivint Solar and SunEdison and certain of their financial and legal advisors;

 

  8) reviewed drafts of the Merger Agreement, the Voting Agreement, the Indenture, and the renewed debt commitment letters and certain related documents in connection with the Merger; and

 

  9) performed such other analyses and considered such other factors as Morgan Stanley deemed appropriate.

In arriving at the Pre-Notice Opinion, Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to it by Vivint Solar and SunEdison, and formed a substantial basis for the Pre-Notice

 

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Opinion. With respect to the Adjusted Vivint Projections, as well as certain extrapolations therefrom prepared with guidance from management of Vivint Solar and which have been approved for its use by management of Vivint Solar, Morgan Stanley assumed that they had been reasonably prepared on bases reflecting the best then currently available estimates and judgments of the management of Vivint Solar of the future financial performance of Vivint Solar. Morgan Stanley was advised by Vivint Solar, and assumed, with Vivint Solar’s consent, that the Adjusted Vivint Projections and extrapolations therefrom were reasonable bases upon which to evaluate the business and financial prospects of Vivint Solar. In addition, Morgan Stanley assumed that the Merger would be consummated in accordance with the terms set forth in the Merger Agreement without any waiver, amendment or delay of any terms or conditions, including, among other things, that SunEdison would obtain financing in accordance with the terms set forth in the renewed debt commitment letters and that the final Merger Agreement, Voting Agreement, Indenture and renewed debt commitment letters would not differ in any material respect from the drafts thereof furnished to Morgan Stanley prior to delivery of the Pre-Notice Opinion. Morgan Stanley assumed that in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the proposed Merger, no delays, limitations, conditions or restrictions would be imposed that would have a material adverse effect on the proposed Merger. Morgan Stanley is not a legal, tax, regulatory or actuarial advisor. Morgan Stanley is a financial advisor only and relied upon, without independent verification, the assessments of Vivint Solar and SunEdison and certain of their legal, tax, regulatory or actuarial advisors with respect to legal, tax, regulatory or actuarial matters. Morgan Stanley’s opinion was limited as to whether the Implied Pre-Notice Merger Consideration to be received by the holders of shares of Vivint Solar common stock (other than any such holder entering into the Voting Agreement) pursuant to the Merger Agreement was fair from a financial point of view to such holders. Morgan Stanley was not asked to opine on, and did not express any view on, and the Pre-Notice Opinion does not address, the Vivint Solar Option. Morgan Stanley expressed no opinion with respect to the fairness or otherwise of any merger consideration to be received by holders of Vivint Solar common stock (other than any such holder entering into the Voting Agreement) relative to that to be received by 313, if Vivint Solar were to exercise the Vivint Solar Option. Morgan Stanley expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of Vivint Solar’s officers, directors or employees, or any class of such persons, relative to the consideration to be received by the holders of shares of Vivint Solar common stock in the Merger and the Pre-Notice Opinion does not address the underlying business decision to effect the Merger or any other terms of the Merger. The Pre-Notice Opinion does not address the relative merits of the Merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available, nor does it address the underlying business decision of Vivint Solar to enter into the Merger Agreement. Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of Vivint Solar or SunEdison, nor was it furnished with any such valuations or appraisals. Morgan Stanley did not evaluate the solvency of Vivint Solar, SunEdison or any other entity under any state, federal or other laws relating to bankruptcy, insolvency or similar matters and the Pre-Notice Opinion does not in any way address the solvency of Vivint Solar, SunEdison or any other entity. Morgan Stanley’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it as of December 9, 2015. Events occurring on or after such date may affect Morgan Stanley’s opinion and the assumptions used in preparing it, and Morgan Stanley did not assume any obligation to update, revise or reaffirm the Pre-Notice Opinion.

In arriving at the Pre-Notice Opinion, Morgan Stanley was not authorized to solicit, and did not solicit, interest from any party with respect to the acquisition, business combination or other extraordinary transaction involving Vivint Solar, nor did it negotiate with any parties, other than SunEdison, with respect to the possible acquisition of Vivint Solar or certain of its constituent businesses.

Summary of Financial Analyses

The following is a brief summary of the material financial analyses performed by Morgan Stanley in connection with its oral opinion and the preparation of its written opinion letter dated December 9, 2015. The various analyses summarized below were based on the closing price for the Vivint Solar common stock as of December 8, 2015, the last full trading day preceding the day of the special meeting of Vivint Solar’s board of

 

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directors to consider and approve, adopt and authorize the Amendment to the Agreement and Plan of Merger, dated as of December 9, 2015. The following summary is not a complete description of Morgan Stanley’s opinion or the financial analyses performed and factors considered by Morgan Stanley in connection with the Pre-Notice Opinion, nor does the order of analyses described represent the relative importance or weight given to those analyses. The analyses described below must be considered as a whole; considering any portion of such analyses and of the factors considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Morgan Stanley’s opinion. Morgan Stanley considered a number of factors in analyzing the Implied Pre-Notice Merger Consideration. The fact that points in the ranges of implied equity value per share of Vivint Solar common stock derived below may be less than or greater than the Implied Pre-Notice Merger Consideration is not necessarily dispositive. Furthermore, mathematical analysis (such as determining the average or median) is not in itself a meaningful method of using the data referred to below.

Selected Company Analysis

Morgan Stanley reviewed certain financial information of Vivint Solar based upon Vivint Solar’s public filings and investor presentations and projections provided by Vivint Solar management with publicly available operating metrics for SolarCity and Sunrun Inc. (“Sunrun”), the public companies that shared similar business characteristics to Vivint Solar based upon SolarCity’s and Sunrun’s public filings, investor presentations and research analyst reports.

For purposes of this analysis, Morgan Stanley observed the following statistics of SolarCity and Sunrun:

 

    the ratio of aggregate value, defined as market capitalization plus total debt less cash and cash equivalents, to estimated cumulative retained value, defined as discounted net cash flows from customers pursuant to long-term customer contracts net of estimated cash distributions to fund investors and estimated operating expenses for systems installed as of the measurement date for the period from July 30, 2015 through December 8, 2015 for SolarCity, and for the period from August 4, 2015 through December 8, 2015 for Sunrun (based on estimates provided by SolarCity and Sunrun in their respective public filings); and

 

    the ratio of aggregate value to nominal contracted payments remaining, defined as the sum of the remaining contracted cash payments that customers are expected to pay over the term of their agreements for systems installed as of the measurement date for the period from July 30, 2015 through December 8, 2015 for SolarCity, and for the period from August 4, 2015 through December 8, 2015 for Sunrun (based on estimates provided by SolarCity and Sunrun in their respective public filings).

Morgan Stanley then applied a representative range of financial multiples of SolarCity and Sunrun to the relevant Vivint Solar financial statistics based on estimates provided by Vivint Solar in its public filings. Applying a representative range of aggregate value to cumulative retained value ratios of 0.9x to 1.7x based on the 25th and 75th percentile range observed during the period from July 30, 2015 through December 8, 2015 for SolarCity and the period from August 4, 2015 through December 8, 2015 for Sunrun, Morgan Stanley calculated an implied equity reference range per share of Vivint Solar common stock as of December 8, 2015 of $4.60 to $10.05, as compared to the Implied Pre-Notice Merger Consideration of $10.16 per share of Vivint Solar common stock. Applying a representative range of aggregate value to cumulative retained value ratios of 0.8x to 1.3x based on ratios observed on December 8, 2015 for SolarCity and Sunrun, Morgan Stanley calculated an implied equity reference range per share of Vivint Solar common stock as of December 8, 2015 of $3.95 to $7.35, as compared to the Implied Pre-Notice Merger Consideration of $10.16 per share of Vivint Solar common stock. Applying a representative range of aggregate value to nominal contracted payments remaining ratios of 0.6x to 0.9x based on the 25th and 75th percentile range observed during the period from July 30, 2015 through December 8, 2015 for SolarCity and the period from August 4, 2015 through December 8, 2015 for Sunrun, Morgan Stanley calculated an implied equity reference range per share of Vivint Solar common stock as of December 8, 2015 of $7.00 to $11.30, as compared to the Implied Pre-Notice Merger Consideration of $10.16 per share of Vivint Solar common stock. Applying a representative range of aggregate value to nominal

 

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contracted payments remaining ratios of 0.5x to 0.6x based on ratios observed on December 8, 2015 for SolarCity and Sunrun, Morgan Stanley calculated an implied equity reference range per share of Vivint Solar common stock as of December 8, 2015 of $5.60 to $7.00, as compared to the Implied Pre-Notice Merger Consideration of $10.16 per share of Vivint Solar common stock.

SolarCity and Sunrun are not identical to Vivint Solar. In evaluating Vivint Solar, Morgan Stanley made judgments and assumptions with regard to industry performance, the impact of the companies’ business models on their respective financial performance, general business, economic, market and financial conditions and other matters, which are beyond the control of Vivint Solar. These include, among other things, the impact of competition on the businesses of Vivint Solar, SunEdison and the industry generally, industry growth, and the absence of any material adverse change in the financial condition and prospects of Vivint Solar, SunEdison or the industry, or in the financial markets in general.

Portfolio Valuation Analysis

Morgan Stanley performed a portfolio valuation analysis of Vivint Solar to calculate an implied equity reference range per share of Vivint Solar common stock. Morgan Stanley utilized the Adjusted Vivint Projections provided for years 2015 through 2017.

Morgan Stanley first calculated an estimated value of systems installed in each of the years 2015, 2016 and 2017 by discounting the projected future cash flows attributable to such installed systems in a given year to the end of that year. For example, the cash flows attributable to systems installed in 2016 were discounted to the end of 2016. The discount rate was chosen by Morgan Stanley based on prevailing interest rates and Morgan Stanley’s judgment of the estimated cost of capital for contracted cash flows associated with installed systems.

Morgan Stanley then subtracted estimated corporate expenses from the estimated value of systems installed to arrive at estimated total cash flow to equity for years 2015, 2016, and 2017. Estimated total cash flow to equity was discounted to a present value as of December 31, 2015 using a range of discount rates chosen by Morgan Stanley based on prevailing interest rates and Morgan Stanley’s judgment of Vivint Solar’s estimated cost of capital.

Morgan Stanley calculated a terminal value, assuming that Vivint Solar will continue to install new systems consistent with the estimated total cash flow to equity for Vivint Solar for 2017 for an additional 30 years after 2017 as per Vivint Solar management guidance and discounted this figure to a present value as of December 31, 2015 using a range of discount rates chosen by Morgan Stanley based on prevailing interest rates and Morgan Stanley’s judgment of Vivint Solar’s estimated cost of capital.

This analysis indicated an approximate implied equity reference range per share of Vivint Solar common stock of $4.45 to $4.70, as compared to the Implied Pre-Notice Merger Consideration of $10.16 per share of Vivint Solar common stock.

Additional Financial Statistics

Morgan Stanley also reviewed, for informational purposes, certain other financial statistics, in connection with the Pre-Notice Opinion as described below.

Trading Range Analysis

Morgan Stanley reviewed the range of closing prices of Vivint Solar common stock for various periods ending on December 8, 2015. Morgan Stanley observed the following:

 

Period Ending December 8, 2015

   Range of Closing Prices  

Last 30 Trading Days

   $ 7.35 – $11.85   

Trading days since the Vivint Solar’s October 1, 2014 Initial Public Offering

   $ 7.35 – $16.00   

 

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Notice Opinion

In connection with rendering the Notice Opinion, Morgan Stanley, among other things:

 

  1) reviewed certain publicly available financial statements and other business and financial information of Vivint Solar and SunEdison, respectively;

 

  2) reviewed certain internal financial statements and other financial and operating data concerning Vivint Solar and SunEdison, respectively;

 

  3) reviewed the Vivint Forecasts and the Adjusted Vivint Projections and the Adjusted SunEdison Projections, and discussed with the management of Vivint Solar its assessments as to the relative likelihood of achieving the future financial results in the Vivint Forecasts and the Vivint Adjusted Forecasts;

 

  4) discussed the past and current operations and financial condition and the prospects of Vivint Solar with senior executives of Vivint Solar and SunEdison, respectively;

 

  5) reviewed the reported prices and trading activity for Vivint Solar common stock and the SunEdison common stock;

 

  6) compared the financial performance of Vivint Solar and the prices and trading activity of Vivint Solar common stock with that of certain other publicly traded companies Morgan Stanley deemed relevant;

 

  7) participated in certain discussions and negotiations among representatives of Vivint Solar and SunEdison and certain of their financial and legal advisors;

 

  8) reviewed drafts of the Merger Agreement, the Notice, the Voting Agreement, the Indenture, and the renewed debt commitment letters and certain related documents in connection with the Merger; and

 

  9) performed such other analyses and considered such other factors as Morgan Stanley deemed appropriate.

In arriving at the Notice Opinion, Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to it by Vivint Solar and SunEdison, and formed a substantial basis for the Notice Opinion. With respect to the Adjusted Vivint Projections, as well as certain extrapolations therefrom prepared with guidance from management of Vivint Solar and which have been approved for its use by management of Vivint Solar, Morgan Stanley assumed that they had been reasonably prepared on bases reflecting the best then currently available estimates and judgments of the management of Vivint Solar of the future financial performance of Vivint Solar. Morgan Stanley was advised by Vivint Solar, and assumed, with Vivint Solar’s consent, that the Adjusted Vivint Projections and extrapolations therefrom were reasonable bases upon which to evaluate the business and financial prospects of Vivint Solar. In addition, Morgan Stanley assumed that the Merger will be consummated in accordance with the terms set forth in the Merger Agreement and the Notice without any waiver, amendment or delay of any terms or conditions, including, among other things, that SunEdison would obtain financing in accordance with the terms set forth in the renewed debt commitment letters and that the final Notice, Merger Agreement, Voting Agreement, Indenture and renewed debt commitment letters would not differ in any material respect from the drafts thereof furnished to Morgan Stanley prior to the delivery of the Notice Opinion. Morgan Stanley assumed that in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the proposed Merger, no delays, limitations, conditions or restrictions would be imposed that would have a material adverse effect on the proposed Merger. Morgan Stanley is not a legal, tax, regulatory or actuarial advisor. Morgan Stanley is a financial advisor only and relied upon, without independent verification, the assessments of Vivint Solar and SunEdison and certain of their legal, tax, regulatory or actuarial advisors with respect to legal, tax, regulatory or actuarial matters. Morgan Stanley’s opinion was limited as to whether the Implied Notice Merger Consideration to be received by the holders of shares of Vivint Solar common stock (other than any such holder entering into the Voting Agreement) pursuant to the Merger Agreement and the Notice was fair from a financial point of view

 

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to such holders. Morgan Stanley expressed no opinion with respect to the fairness or otherwise of any merger consideration to be received by holders of Vivint Solar common stock (other than any such holder entering into the Voting Agreement) relative to that to be received by 313. Morgan Stanley understands that Vivint Solar engaged Duff & Phelps to advise on the fair market value of the Note Consideration, on which Morgan Stanley does not express any view. Morgan Stanley expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of Vivint Solar’s officers, directors or employees, or any class of such persons, relative to the consideration to be received by the holders of shares of Vivint Solar common stock in the Merger and the Notice Opinion does not address the underlying business decision to effect the Merger or any other terms of the Merger. The Notice Opinion does not address the relative merits of the Merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available, nor does it address the underlying business decision of Vivint Solar to enter into the Merger Agreement or deliver the Notice. Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of Vivint Solar or SunEdison, nor was it furnished with any such valuations or appraisals. Morgan Stanley did not evaluate the solvency of Vivint Solar, SunEdison or any other entity under any state, federal or other laws relating to bankruptcy, insolvency or similar matters and the Notice Opinion does not in any way address the solvency of Vivint Solar, SunEdison or any other entity. Morgan Stanley’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it as of December 11, 2015. Events occurring on or after such date may affect Morgan Stanley’s opinion and the assumptions used in preparing it, and Morgan Stanley did not assume any obligation to update, revise or reaffirm the Notice Opinion.

In arriving at the Notice Opinion, Morgan Stanley was not authorized to solicit, and did not solicit, interest from any party with respect to the acquisition, business combination or other extraordinary transaction involving Vivint Solar, nor did it negotiate with any parties, other than SunEdison, with respect to the possible acquisition of Vivint Solar or certain of its constituent businesses.

Summary of Financial Analyses

The following is a brief summary of the material financial analyses performed by Morgan Stanley in connection with its oral opinion and the preparation of its written opinion letter dated December 11, 2015. The various analyses summarized below were based on the closing price for the Vivint Solar common stock as of December 10, 2015, the last full trading day preceding the day of the special meeting of Vivint Solar’s board of directors to consider and approve, adopt and authorize the delivery of the Notice. The following summary is not a complete description of Morgan Stanley’s opinion or the financial analyses performed and factors considered by Morgan Stanley in connection with the Notice Opinion, nor does the order of analyses described represent the relative importance or weight given to those analyses. The analyses described below must be considered as a whole; considering any portion of such analyses and of the factors considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Morgan Stanley’s opinion. Morgan Stanley considered a number of factors in analyzing the Implied Notice Merger Consideration. The fact that points in the ranges of implied equity value per share of Vivint Solar common stock derived below may be less than or greater than the Implied Notice Merger Consideration is not necessarily dispositive. Furthermore, mathematical analysis (such as determining the average or median) is not in itself a meaningful method of using the data referred to below.

Selected Company Analysis

Morgan Stanley reviewed certain financial information of Vivint Solar based upon Vivint Solar’s public filings and investor presentations and projections provided by Vivint Solar management with publicly available operating metrics for SolarCity and Sunrun, the public companies that shared similar business characteristics to Vivint Solar based upon SolarCity’s and Sunrun’s public filings, investor presentations and research analyst reports.

 

    For purposes of this analysis, Morgan Stanley observed the following statistics of SolarCity and Sunrun:

 

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    the ratio of aggregate value, defined as market capitalization plus total debt less cash and cash equivalents, to estimated cumulative retained value, defined as discounted net cash flows from customers pursuant to long-term customer contracts net of estimated cash distributions to fund investors and estimated operating expenses for systems installed as of the measurement date for the period from July 30, 2015 through December 10, 2015 for SolarCity, and for the period from August 4, 2015 through December 10, 2015 for Sunrun (based on estimates provided by SolarCity and Sunrun in their respective public filings); and

 

    the ratio of aggregate value to nominal contracted payments remaining, defined as the sum of the remaining contracted cash payments that customers are expected to pay over the term of their agreements for systems installed as of the measurement date for the period from July 30, 2015 through December 10, 2015 for SolarCity, and for the period from August 4, 2015 through December 10, 2015 for Sunrun (based on estimates provided by SolarCity and Sunrun in their respective public filings).

Morgan Stanley then applied a representative range of financial multiples of SolarCity and Sunrun to the relevant Vivint Solar financial statistics based on estimates provided by Vivint Solar in its public filings. Applying a representative range of aggregate value to cumulative retained value ratios of 0.9x to 1.7x based on the 25th and 75th percentile range observed during the period from July 30, 2015 through December 10, 2015 for SolarCity and the period from August 4, 2015 through December 10, 2015 for Sunrun, Morgan Stanley calculated an implied equity reference range per share of Vivint Solar common stock as of December 10, 2015 of $4.60 to $10.05, as compared to the Implied Notice Merger Consideration of $10.68 per share of Vivint Solar common stock. Applying a representative range of aggregate value to cumulative retained value ratios of 0.7x to 1.3x based on ratios observed on December 10, 2015 for SolarCity and Sunrun, Morgan Stanley calculated an implied equity reference range per share of Vivint Solar common stock as of December 10, 2015 of $3.25 to $7.35, as compared to the Implied Notice Merger Consideration of $10.68 per share of Vivint Solar common stock. Applying a representative range of aggregate value to nominal contracted payments remaining ratios of 0.5x to 0.9x based on the 25th and 75th percentile range observed during the period from July 30, 2015 through December 10, 2015 for SolarCity and the period from August 4, 2015 through December 10, 2015 for Sunrun, Morgan Stanley calculated an implied equity reference range per share of Vivint Solar common stock as of December 10, 2015 of $5.60 to $11.30, as compared to the Implied Notice Merger Consideration of $10.68 per share of Vivint Solar common stock. Applying a representative range of aggregate value to nominal contracted payments remaining ratios of 0.5x to 0.6x based on ratios observed on December 10, 2015 for SolarCity and Sunrun, Morgan Stanley calculated an implied equity reference range per share of Vivint Solar common stock as of December 10, 2015 of $5.60 to $7.00, as compared to the Implied Notice Merger Consideration of $10.68 per share of Vivint Solar common stock.

SolarCity and Sunrun are not identical to Vivint Solar. In evaluating Vivint Solar, Morgan Stanley made judgments and assumptions with regard to industry performance, the impact of the companies’ business models on their respective financial performance, general business, economic, market and financial conditions and other matters, which are beyond the control of Vivint Solar. These include, among other things, the impact of competition on the businesses of Vivint Solar, SunEdison and the industry generally, industry growth, and the absence of any material adverse change in the financial condition and prospects of Vivint Solar, SunEdison or the industry, or in the financial markets in general.

Portfolio Valuation Analysis

Morgan Stanley performed a portfolio valuation analysis of Vivint Solar to calculate an implied equity reference range per share of Vivint Solar common stock. Morgan Stanley utilized the Adjusted Vivint Projections provided for years 2015 through 2017.

Morgan Stanley first calculated an estimated value of systems installed in each of the years 2015, 2016 and 2017 by discounting the projected future cash flows attributable to such installed systems in a given year to the

 

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end of that year. For example, the cash flows attributable to systems installed in 2016 were discounted to the end of 2016. The discount rate was chosen by Morgan Stanley based on prevailing interest rates and Morgan Stanley’s judgment of the estimated cost of capital for contracted cash flows associated with installed systems.

Morgan Stanley then subtracted estimated corporate expenses from the estimated value of systems installed to arrive at estimated total cash flow to equity for years 2015, 2016, and 2017. Estimated total cash flow to equity was discounted to a present value as of December 31, 2015 using a range of discount rates chosen by Morgan Stanley based on prevailing interest rates and Morgan Stanley’s judgment of Vivint Solar’s estimated cost of capital.

Morgan Stanley calculated a terminal value, assuming that Vivint Solar will continue to install new systems consistent with the estimated total cash flow to equity for Vivint Solar for 2017 for an additional 30 years after 2017 as per Vivint Solar management guidance and discounted this figure to a present value as of December 31, 2015 using a range of discount rates chosen by Morgan Stanley based on prevailing interest rates and Morgan Stanley’s judgment of Vivint Solar’s estimated cost of capital.

This analysis indicated an approximate implied equity reference range per share of Vivint Solar common stock of $3.70 to $3.85 as compared to the Implied Notice Merger Consideration of $10.68 per share of Vivint Solar common stock.

Additional Financial Statistics

Morgan Stanley also reviewed, for informational purposes, certain other financial statistics, in connection with the Notice Opinion as described below.

Trading Range Analysis

Morgan Stanley reviewed the range of closing prices of Vivint Solar common stock for various periods ending on December 10, 2015. Morgan Stanley observed the following:

 

Period Ending December 10, 2015

   Range of Closing Prices  

Last 30 Trading Days

   $ 7.35 – $11.85   

Trading days since the Vivint Solar’s October 1, 2014 Initial Public Offering

   $ 7.35 – $16.00   

General

In connection with the review of the Merger, including, in the case of the Notice Opinion, delivery of the Notice, by Vivint Solar’s board of directors, Morgan Stanley performed a variety of financial and comparative analyses for purposes of rendering its opinions. The preparation of a financial opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. In arriving at its opinions, Morgan Stanley considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor it considered. Morgan Stanley believes that selecting any portion of its analyses, without considering all analyses as a whole, would create an incomplete view of the process underlying its analyses and opinion. In addition, Morgan Stanley may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis described above should not be taken to be Morgan Stanley’s view of the actual value of Vivint Solar. In performing its analyses, Morgan Stanley made numerous assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, which are beyond the control of Vivint Solar and SunEdison. These include, among other things, the impact of competition on the businesses of Vivint Solar, SunEdison and the industry generally, industry growth, and the absence of any material adverse change in the financial condition and prospects of Vivint Solar, SunEdison or the industry, or in the financial markets in general. Any estimates contained in

 

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Morgan Stanley’s analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates.

Morgan Stanley conducted the analyses described above solely as part of its analysis of the fairness, from a financial point of view as of the date of the applicable opinion, of the Implied Initial Merger Consideration, the Implied Pre-Notice Merger Consideration and Implied Notice Merger Consideration, as the case may be, to be received by holders of shares of Vivint Solar common stock (other than any such holder entering into the Voting Agreement) pursuant to the Merger Agreement and, in the case of the Notice Opinion, the Notice, and in connection with the delivery of its opinions to Vivint Solar’s board of directors. These analyses do not purport to be appraisals or to reflect the prices at which shares of Vivint Solar common stock might actually trade.

The Merger Consideration was determined through arm’s-length negotiations between Vivint Solar and SunEdison and was approved by Vivint Solar’s board of directors. Morgan Stanley acted as financial advisor to Vivint Solar’s board of directors during these negotiations but did not, however, recommend any specific merger consideration to Vivint Solar, or that any specific merger consideration constituted the only appropriate merger consideration for the Merger. In addition, Morgan Stanley’s opinions do not address the prices at which SunEdison common stock or any convertible notes of SunEdison, including the Convertible Notes and the Reference Convertible Notes, will trade at any time and Morgan Stanley expresses no opinion or recommendation as to how Vivint Solar’s stockholders should vote at any stockholders’ meeting to be held (or execute a written consent in lieu of a meeting) in connection with the Merger.

Morgan Stanley’s opinions and its presentations to Vivint Solar’s board of directors were some of many factors taken into consideration by Vivint Solar’s board of directors in deciding to approve, adopt and authorize the original Merger Agreement, the Merger Agreement and the Notice. Consequently, the analyses as described above should not be viewed as determinative of the recommendation of Vivint Solar’s board of directors with respect to the Merger Consideration or of whether Vivint Solar’s board of directors would have been willing to agree to a different merger consideration. Morgan Stanley’s opinions were approved by a committee of Morgan Stanley investment banking and other professionals in accordance with its customary practice.

Morgan Stanley is a global financial services firm engaged in the securities, investment management and individual wealth management businesses. Morgan Stanley’s securities business is engaged in securities underwriting, trading and brokerage activities, foreign exchange, commodities and derivatives trading, prime brokerage, as well as providing investment banking, financing and financial advisory services. Morgan Stanley, its affiliates, directors and officers may at any time invest on a principal basis or manage funds that invest, hold long or short positions, finance positions, and may trade or otherwise structure and effect transactions, for their own account or the accounts of its customers, in debt or equity securities or loans of SunEdison, Vivint Solar, TerraForm Power, TerraForm Global, First Wind, SSL, Blackstone (the controlling equity owner of 313) and certain of its affiliates and their affiliated funds’ respective majority controlled portfolio companies (collectively the “Blackstone Entities”) or any other company, or any currency or commodity, that may be involved in this transaction, or any related derivative instrument. In addition, Morgan Stanley, its affiliates, directors or officers, including individuals working with Vivint Solar in connection with the Merger, may have committed and may commit in the future to invest in private equity funds managed by affiliates of 313 and Blackstone.

Morgan Stanley acted as financial advisor to Vivint Solar’s board of directors in connection with the Merger and, under the terms of its engagement letter, $2,500,000 was already paid to Morgan Stanley. In addition, Morgan Stanley will be entitled to receive approximately $14,500,000 upon the consummation of the Merger for serving in this capacity. Vivint Solar has also agreed to reimburse Morgan Stanley for its reasonable expenses incurred in performing its services. In addition, Vivint Solar has agreed to indemnify Morgan Stanley and its affiliates, their respective directors, officers, agents and employees and each person, if any, controlling Morgan Stanley or any of its affiliates against certain liabilities and expenses, including certain liabilities under the federal securities laws, related to or arising out of Morgan Stanley’s engagement.

 

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From July 19, 2013 until the date of the Notice Opinion, Morgan Stanley and its affiliates have provided (i) certain financing services for SunEdison, including in connection with debt financing and convertible notes issuances and have acted as financial advisor to SunEdison on its acquisition of First Wind announced on November 17, 2014 for which Morgan Stanley and its affiliates received aggregate fees of approximately $31 million, (ii) certain financing services for TerraForm Power, including in connection with relationship lending, debt financing and equity issuances, and have acted as financial advisor to TerraForm Power on its acquisition of Atlantic Power Corp’s wind assets announced on April 1, 2015 and the formation of the TerraForm Private Warehouse announced on June 29, 2015 for which Morgan Stanley and its affiliates received aggregate fees of approximately $24 million, (iii) certain financing services for TerraForm Global for which Morgan Stanley and its affiliates received aggregate fees of approximately $10 million, (iv) certain financing services for First Wind for which Morgan Stanley and its affiliates received aggregate fees of approximately $4 million, (v) certain financing services for SSL for which Morgan Stanley and its affiliates received aggregate fees of approximately $3 million, and (vi) certain advisory and financing services for Vivint Solar, including in connection with relationship lending and Vivint Solar’s initial public offering announced on August 26, 2014 for which Morgan Stanley and its affiliates received aggregate fees of approximately $4 million. From July 19, 2013 until the date of the Notice Opinion, Morgan Stanley and its affiliates have provided financial advisory and/or financing services for the Blackstone Entities and have received fees for such services, including approximately $12 million for certain advisory and/or financing services provided to The Blackstone Group L.P. and including customary fees, which are significant, for advisory and/or financing services provided to Blackstone Entities. As of December 4, 2015, as far as Morgan Stanley was aware, Morgan Stanley held an aggregate interest of approximately 7.05% in the common stock of The Blackstone Group L.P., which interests were held in connection with Morgan Stanley’s investment management business, wealth management business, including client discretionary accounts, or ordinary course trading activities, including hedging activities. At the time of the Notice Opinion, Morgan Stanley and its affiliates were providing financing services unrelated to the Merger to SunEdison, including acting as a joint book-running manager on the Global IPO announced on May 7, 2015; advisory and financing services unrelated to the Merger to TerraForm Power, including in connection with TerraForm Power’s acquisition of Invenergy’s wind assets, as announced on July 6, 2015; and financial advisory and/or financing services to certain of the Blackstone Entities, and Morgan Stanley and its affiliates have, following the date of Morgan Stanley’s opinion, received and would expect to receive fees in connection with such services.

Opinion of Duff & Phelps

Vivint Solar, Inc. engaged Duff & Phelps, LLC to render an opinion as to the fairness, from a financial point of view, to Vivint Solar’s stockholders (other than 313) of (1) that portion of the Additional Cash Consideration that would be attributable toward the Note Consideration in the Section 2.01 Notice payable in the aggregate in respect of all Public Shares relative to the aggregate amount of the aggregate Merger Consideration that will be paid for all shares of Vivint Solar common stock (“Shares”) held by 313 pursuant to clause (III) of Section 2.01(b)(ii)(B) of the Merger Agreement and (2) that portion of the Additional Cash Consideration that would be attributable toward the Stock Consideration in the Section 2.01 Notice payable in the aggregate in respect of all Public Shares relative to the aggregate amount of the aggregate Merger Consideration that will be paid for all Shares held by 313 pursuant to clause (V) and clause (VII) of Section 2.01(b)(ii)(B) of the Merger Agreement.

As a leading global independent provider of financial advisory and investment banking services, Duff & Phelps is regularly engaged in the valuation of businesses and securities and the preparation of opinions in connection with mergers, acquisitions, spin-offs, financings, and other strategic transactions.

On December 11, 2015, Duff & Phelps delivered its analysis and opinion to the board of directors of Vivint Solar that, as of the date and subject to the assumptions, qualifications, and limitations set forth therein, (1) the portion of the Additional Cash Consideration that would be attributable toward the Note Consideration in the Section 2.01 Notice payable in the aggregate in respect of all Public Shares relative to the aggregate amount of

 

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the aggregate Merger Consideration that will be paid for all Shares held by 313 pursuant to clause (III) of Section 2.01(b)(ii)(B) of the Merger Agreement and (2) the portion of the Additional Cash Consideration that would be attributable toward the Stock Consideration in the Section 2.01 Notice payable in the aggregate in respect of all Public Shares relative to the aggregate amount of the aggregate Merger Consideration that will be paid for all Shares held by 313 pursuant to clause (V) and clause (VII) of Section 2.01(b)(ii)(B) of the Merger Agreement, is fair from a financial point of view to Vivint Solar’s stockholders (other than 313) (without giving effect to any impact of the Merger on any particular stockholder other than in its capacity as a stockholder).

The full text of the written opinion of Duff & Phelps, which sets forth, among other things, assumptions made, procedures followed, matters considered and qualifications and limitations of the review undertaken in rendering the opinion, is attached as Annex M to this proxy statement and is incorporated by referenced herein. You are urged to read the opinion carefully in its entirety prior to making any investment decision.

The following is a summary of the material analyses performed by Duff & Phelps in connection with rendering its opinion. Duff & Phelps noted that the analyses have been designed specifically for the opinion and are not intended to apply to any other purposes. While this summary describes the analyses and factors that Duff & Phelps deemed material in its opinion, it does not purport to be a comprehensive description of all analyses and factors considered by Duff & Phelps. The opinion is based on the comprehensive consideration of the various analyses performed. This summary is qualified in its entirety by reference to the full text of the opinion.

In arriving at its opinion, Duff & Phelps did not attribute any particular weight to any particular factor considered by it, but rather made qualitative judgments as to the significance and relevance of each factor. Duff & Phelps believes that its analysis must be considered in its entirety and that selecting portions of its analysis and the factors considered by Duff & Phelps, without considering the analysis and factors in their entirety, could create a misleading or incomplete view of the evaluation process underlying the Duff & Phelps opinion. The conclusion reached by Duff & Phelps, therefore, is based on the application of Duff & Phelps’ own experience and judgment to the analysis and factors considered by Duff & Phelps, taken as a whole.

Duff & Phelps has consented to the use of its opinion in this proxy statement.

Scope of Duff & Phelps’ Analysis

In connection with its opinion, Duff & Phelps made such reviews, analyses and inquiries as it deemed necessary and appropriate under the circumstances. Duff & Phelps also took into account its assessment of general economic, market and financial conditions, as well as its experience in securities and business valuation, in general, and with respect to similar securities, in particular. Duff & Phelps’ procedures, investigations, and financial analysis with respect to the preparation of its opinion included, but were not limited to, the items summarized below:

 

    Duff & Phelps reviewed the following documents:

 

    Vivint Solar’s annual reports and audited financial statements included in Vivint Solar’s Form 10-K filed with the SEC on March 13, 2015 for the year ended December 31, 2014 and Vivint Solar’s unaudited interim financial statements for the quarterly period ended September 30, 2015 included in Vivint Solar’s Form 10-Q filed with the SEC on November 16, 2015;

 

    SunEdison’s annual reports and audited financial statements on Form 10-K filed with the SEC for the year ended December 31, 2014 and SunEdison’s unaudited interim financial statements for the quarterly period ended September 30, 2015 included in SunEdison’s Form 10-Q filed with the SEC on November 9, 2015; and

 

    Documents related to the Merger, including the Merger Agreement and the Section 2.01 Notice to be dated December 13, 2015 pursuant to Section 2.01(b)(ii)(B) of the Merger Agreement;

 

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    Duff & Phelps reviewed the historical trading price and trading volume of Vivint Solar’s common stock and SunEdison’s common stock and debt securities (including all series of convertible notes of SunEdison), and the publicly traded securities of certain other companies that Duff & Phelps deemed relevant;

 

    Duff & Phelps performed certain valuation and comparative analyses using generally accepted valuation and analytical techniques including an analysis of selected comparable securities of SunEdison that Duff & Phelps deemed relevant; and

 

    Conducted such other analyses and considered such other factors as Duff & Phelps deemed appropriate.

Certain Assumptions made by Duff & Phelps

In its review and analysis, and in arriving at its opinion, Duff & Phelps made certain assumptions and relied on certain information. In particular, Duff & Phelps, with Vivint Solar’s consent:

 

    Relied upon the accuracy, completeness, and fair presentation of all information, data, advice, opinions and representations obtained from public sources or provided to it from private sources, including Vivint Solar management or its advisors, and did not independently verify such information;

 

    Relied upon the fact that the board of directors of Vivint Solar was advised by counsel as to all legal matters with respect to the Merger, including whether all procedures required by law to be taken in connection with the Merger have been duly, validly and timely taken;

 

    Assumed that information supplied and representations made by Vivint Solar’s management and its advisors were substantially accurate regarding Vivint Solar and the Merger;

 

    Assumed that the representations and warranties made in the Merger Agreement were substantially accurate;

 

    Assumed that the final versions of all documents reviewed by Duff & Phelps in draft form conformed in all material respects to the drafts reviewed;

 

    Assumed that there was no material change in the assets, liabilities, financial condition, results of operations, business, or prospects of Vivint Solar or SunEdison since the date of the most recent financial statements and other information made available to Duff & Phelps, and that there was no information or facts that would have made the information reviewed by Duff & Phelps incomplete or misleading;

 

    Assumed that all of the conditions required to implement the Merger will be satisfied and that the Merger will be completed in accordance with the Merger Agreement without any amendments thereto or any waivers of any terms or conditions thereof; and

 

    Assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Merger will be obtained without any adverse effect on Vivint Solar or SunEdison.

Duff & Phelps advised Vivint Solar that to the extent that any of the foregoing assumptions or any of the facts on which the Duff & Phelps opinion was based proved to be untrue in any material respect, the Duff & Phelps opinion cannot and should not be relied upon. Furthermore, in its analysis and in connection with the preparation of its opinion, Duff & Phelps noted that it made numerous assumptions with respect to industry performance, general business, market and economic conditions and other matters, many of which are beyond the control of any party involved in the Merger.

 

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Summary of Financial Analyses by Duff & Phelps

The following is a summary of the material financial analyses used by Duff & Phelps in connection with its opinion. Duff & Phelps used a generally accepted valuation analysis to estimate the fair market value of the Note Consideration based on the present value of the contracted principal and interest payment schedule for the Convertible Notes and used the average internal rate of return (IRR) from SunEdison’s existing publicly traded convertible notes as the discount rate. Duff & Phelps estimated the fair market value of the Stock Consideration based on the five day volume-weighted average SunEdison stock price and the lower bound of the existing collar based on the current trading price, per the Section 2.01 Notice.

The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses used by Duff & Phelps, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analysis. Rather, the analyses listed in the tables and described below must be considered as a whole; considering any portion of such analyses or factors considered, without considering the analyses and factors in their entirety, could create a misleading or incomplete view of the process underlying Duff & Phelps’ opinion.

Fair Market Value of Note Consideration Analysis

Duff & Phelps conducted a search for other publicly traded convertible debt securities deemed similar to the Convertible Notes to be issued as the Note Consideration. SunEdison’s existing convertible notes were deemed most similar to the Convertible Notes given they were issued by the same company and have similar terms, including coupon, maturity and equity conversion feature. The debt and equity components of SunEdison’s convertible notes are embedded in the prices and internal rates of returns (“IRRs”) of the respective securities, summarized below.

 

Security Description

  Issue Date     Maturity
Date
    Term to
Maturity
    Original
Issue
Amount
    Reference
Price
    Conversion
Price
    5-day
VWAP(2) as
of 12/10/15
    IRR, based
on 5-day
VWAP(2)
 

Series A: 2.000% Senior Unsecured

    12/12/2013        10/1/2018        2.8      $ 300      $ 11.47      $ 14.62        49.75        32.1

Series B: 2.750% Senior Unsecured

    12/12/2013        1/1/2021        5.1      $ 300      $ 11.47      $ 14.62        44.05        23.2

Series C: 0.250% Senior Unsecured

    6/4/2014        1/15/2020        4.1      $ 600      $ 20.67      $ 26.87        36.15        28.8

Series D: 2.375% Senior Unsecured

    1/21/2015        4/15/2022        6.4      $ 460      $ 18.70      $ 25.25        38.28        21.1

Series E: 2.625% Senior Unsecured

    5/12/2015        6/1/2023        7.5      $ 450      $ 27.61      $ 38.65        35.45        20.2

Series F: 3.375% Senior Unsecured

    5/12/2015        6/1/2025        9.5      $ 450      $ 27.61      $ 38.65        35.47        18.4

Mean

                39.86        24.0

Median

                37.21        22.2

New Series: 2.250% Senior Unsecured

    2016        2020        4.0      $ 351.6      $ 4.09 (1)    $ 38.51       

 

(1)  Reference Price for the 2.250% notes is the current stock price as of December 10, 2015.
(2)  VWAP is defined as “volume weighted average price.”

Source: Bloomberg

 

 

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Duff & Phelps selected a range of IRRs for the Convertible Note based on the terms of SunEdison’s existing comparable publicly traded convertible notes and the implied IRRs of such existing convertible notes. Duff & Phelps then performed a discounted cash flow analysis of the contracted principal and interest payment schedule for the Convertible Note using the range of IRRs it selected. Per the formula set forth in the Section 2.01 Notice, the discount rate used in the valuation of the convertible notes was the average IRR of each series of existing SunEdison convertible notes. Duff & Phelps determined that the resulting price from this formula is within the range suggested by the selected IRRs.

 

Present Value of the Aggregate Note Consideration

 
     Low             High     As of
12/10/2015(2)
 

Selected IRR(1)

     29.0      -         22.0     24.0

Present Value of Note

   $ 137 (3)       -       $ 173 (3)    $ 169   

Value as a % of Par(4)

     39.0      -         49.2     48.1

 

(1)  The lower bound and higher bound depicted here were chosen based on Duff & Phelps’ judgment and its analysis of the selected comparable securities, including a comparison of certain terms of the selected comparable securities, such as coupon, maturity date and conversion price, to the terms of the Convertible Notes.
(2)  Calculated per the formula set forth in the Section 2.01 Notice
(3)  Calculated as the net present value of the contracted principal and interest payment schedule of the Convertible Note using the lower/higher bound as the discount rate.
(4)  “Value as a % of Par” is calculated as the fair market value of the aggregate Note Consideration payable in respect of all outstanding Shares divided by the aggregate principal amount Note Consideration payable in respect of all Shares, which principal amount was $351.6 million as of December 1, 2015.

Note: Dollar amounts are in millions

Fair Market Value of Stock Consideration Analysis

Pursuant to the Merger Agreement, the amount of per share Signing Stock Consideration to be paid in respect of the Public Shares without the exercise of the Reallocation Option is equal to $3.31 divided by the volume weighted average price (“VWAP”) per share of SunEdison common stock (rounded down to the nearest cent) on the NYSE for the 30 consecutive trading days ending on (and including) the third trading day immediately prior to the Effective Time, subject to a collar. Based on the trading price of SunEdison common stock as of December 10, 2015, the amount of Signing Stock Consideration payable in respect of each Public Share was 0.120 shares of SunEdison common stock. Duff & Phelps estimated the fair market value of the per share Signing Stock Consideration as the VWAP for the 5 consecutive trading days ending on (and including) December 10, 2015, which resulted in a value of $0.46 per share of Public Share.

Pursuant to the Merger Agreement, the amount of per share Additional Stock Consideration to be paid in respect of the Public Shares without the exercise of the Reallocation Option is equal to $0.75 divided by the VWAP for the 5 consecutive trading days ending on (and including) the second trading day immediately prior to the Effective Time. Based on the trading price of SunEdison common stock as of December 10, 2015, the amount of Signing Stock Consideration payable in respect of each Public Share was 0.197 shares of SunEdison common stock. Duff & Phelps estimated the fair market value of the per share Additional Stock Consideration as the VWAP for the 5 consecutive trading days ending on (and including) December 10, 2015, which resulted in a value of $0.75 per share of Public Share.

Based on the above, the fair market value of the per share Stock Consideration payable in respect of each Public Share was estimated to be $1.20 (after giving effect to rounding) as of December 10, 2015.

 

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Summary of Total Consideration

Based on the fair market value of the Note Consideration and the Stock Consideration described above and the formula set forth in the Section 2.01 Notice, Duff & Phelps calculated the per share consideration to Vivint Solar’s existing public stockholders and 313 as follows:

 

Per Share Consideration for public stockholders

 

Cash Consideration

   $ 7.89   

Additional Cash Consideration

  

FMV of the Note Consideration

   $ 1.59   

FMV of the Stock Consideration

   $ 1.20   
  

 

 

 

Total Per Share Merger Consideration

   $ 10.68   
  

 

 

 

Note: “FMV” is defined as fair market value.

 

Per Share Consideration for 313

  

Convertible Notes Component

  

Principal Amount of the aggregate Note Consideration

   $ 351.6   

Multiplied by: Value % of Par

     48.1
  

 

 

 

FMV of the aggregate Note Consideration

   $ 169.1   

Divided by: Number of Shares held by 313

     82.4   
  

 

 

 

FMV of Convertible Notes payable per Share held by 313

   $ 2.05   

Stock Consideration Component

  

Signing Stock Consideration

  

Number of outstanding Shares as of December 1, 2015

Signing Stock Consideration exchange ratio

    

 

106.5

0.120

  

  

  

 

 

 

Aggregate Signing Stock Consideration(1)

     12.8   

Additional Stock Consideration

  

Number of outstanding Shares as of December 1, 2015

Additional Stock Consideration exchange ratio

    

 

106.5

0.197

  

  

  

 

 

 

Aggregate Additional Stock Consideration(1)

     21.0   

Aggregate Stock Consideration(1)

     33.8   

Multiplied by: 5-day VWAP of SunEdison common stock

   $ 3.80   
  

 

 

 

Total FMV of aggregate Stock Consideration

   $ 128.4   

Divided by: Number of Shares held by 313

     82.4   
  

 

 

 

FMV of SunEdison common stock payable per Share held by 313

   $ 1.56   

Cash Component

  

Cash Consideration

   $ 7.89   

Minus: Aggregate Additional Cash Consideration allocated equally among Shares held by 313(2)

   $ 0.82   
  

 

 

 

Cash consideration payable per Share held by 313

   $ 7.07   
  

 

 

 

Total Per Share Merger Consideration

   $ 10.68   
  

 

 

 

 

(1)  Represents the aggregate number shares of SunEdison common stock payable to 313 with the exercise of the Reallocation Option for such type of Stock Consideration.
(2)  Calculated as the aggregate Additional Cash Consideration ($2.79 multiplied by the number of outstanding Public Shares) divided by the outstanding Shares held by 313.

 

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Source: Share price data collected from Bloomberg.

 

Notes:    All prices and calculations as of December 10, 2015, unless otherwise noted.
  Dollar amounts are in millions, except for per share values
  Shares are in millions
  “FMV” is defined as fair market value.

Certain Qualifications and Limitations of the Duff & Phelps Opinion

Duff & Phelps prepared its opinion effective as of December 11, 2015. The opinion is necessarily based upon market, economic, financial and other conditions as they existed and can be evaluated as of the date of the opinion, and Duff & Phelps disclaims any undertaking or obligation to advise any person of any change in any fact or matter affecting its opinion which may come or be brought to the attention of Duff & Phelps after the date of the opinion.

Duff & Phelps did not evaluate Vivint Solar’s or SunEdison’s solvency or conduct an independent appraisal or physical inspection of any specific assets or liabilities (contingent or otherwise). Duff & Phelps has not been requested to, and did not, (i) initiate any discussions with, or solicit any indications of interest from, third parties with respect to the Merger, the assets, businesses or operations of Vivint Solar, or any alternatives to the Merger, (ii) negotiate the terms of the Merger, and therefore, Duff & Phelps assumed that such terms are the most beneficial terms, from Vivint Solar’s perspective, that could, under the circumstances, be negotiated among the parties to the Merger Agreement and the Merger, or (iii) advise the board of directors of Vivint Solar or any other party with respect to alternatives to the Merger.

Duff & Phelps did not express any opinion as to the market price or value of Vivint Solar’s or SunEdison’s common stock (or anything else) after the announcement or the consummation of the Merger. The opinion should not be construed as a valuation opinion, credit rating, solvency opinion, an analysis of Vivint Solar’s or SunEdison’s credit worthiness, as tax advice, or as accounting advice. Duff & Phelps has not made, and assumes no responsibility to make, any representation, or render any opinion, as to any legal matter.

In rendering the opinion, Duff & Phelps did not express any opinion with respect to (i) the amount or nature of any compensation to any of Vivint Solar’s officers, directors, or employees, or any class of such persons, relative to the consideration to be received by the public shareholders of Vivint Solar in the Merger, or with respect to the fairness of any such compensation, or (ii) the fairness of the Public Cash Consideration or Merger Consideration or any portion thereof, except and only to the extent set forth under the opinion.

The opinion was furnished solely for the use and benefit of the board of directors of Vivint Solar in connection with its consideration of the Merger and is not intended to, and does not, confer any rights or remedies upon any other person, and is not intended to be used, and may not be used, by any other person or for any other purpose, without Duff & Phelps’ express written consent. The opinion (i) does not address the merits of the underlying business decision to enter into the Merger versus any alternative strategy or transaction; (ii) does not address any transaction related to the Merger; (iii) is not a recommendation as to how the board of directors of Vivint Solar or any stockholder should vote or act with respect to any matters relating to the Merger, or whether to proceed with the Merger or any related transaction and (iv) does not indicate that the formulations described in clause (II) of Section 2.01(b)(ii)(A) of the Merger Agreement and the Section 2.01 Notice are the best possibly attainable under any circumstances; instead, it merely states whether such formulations fall within a range suggested by certain financial analyses. The decision as to whether to proceed with the Merger or any related transaction may depend on an assessment of factors unrelated to the financial analysis on which the opinion is based. The opinion should not be construed as creating any fiduciary duty on the part of Duff & Phelps to any party.

 

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Disclosure of Prior Relationships

Duff & Phelps has acted as financial advisor to the board of directors of Vivint Solar and will receive approximately $750,000 for its services. No portion of Duff & Phelps’ fee is contingent upon either the conclusion expressed in the opinion or whether or not the Merger is successfully consummated. Pursuant to the terms of the engagement letter between Vivint Solar and Duff & Phelps, $375,000 of Duff & Phelps’ fee was payable upon Duff & Phelps’ stating to the board of directors of Vivint Solar that it was prepared to deliver its opinion. Vivint Solar has also agreed to reimburse Duff & Phelps for its reasonable expenses incurred in performing its services. In addition, Vivint Solar has agreed to indemnify Duff & Phelps and its affiliates, their respective directors, officers, agents and employees against certain liabilities and expenses related to or arising out of Duff & Phelps’ engagement.

During the two years preceding the date of the opinion, Duff & Phelps has provided accounting related valuation services for SunEdison for financial reporting purposes for which Duff & Phelps and its affiliates received approximately $2 million in fees. During such prior two year period, Duff & Phelps has also provided valuation services for certain affiliates of Blackstone, the private equity firm that controls 313, Vivint Solar’s controlling stockholder for which Duff & Phelps and its affiliates received approximately $5.6 million in fees. For these prior engagements, Duff & Phelps also received customary expense reimbursement, and indemnification.

Certain Vivint Solar Forecasted Financial Information

General Information Regarding Forecasts

This section includes a summary of the Forecasts and related information. The Forecasts summarized in this section were prepared by management of Vivint Solar. The Forecasts were not prepared with a view to public disclosure and the Forecasts were not prepared in compliance with the requirements of GAAP, the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Vivint Solar’s independent registered public accounting firm has not examined, compiled or performed any procedures with respect to the Forecasts presented in this proxy statement, and Vivint Solar’s accounting firm has not expressed any opinion or any other form of assurance regarding such information or the likelihood that Vivint Solar may achieve any particular results, and accordingly the independent registered public accounting firm does not assume any responsibility for or relating to the Forecasts and disclaims any association with such Forecasts. The audit reports of SunEdison and Vivint Solar incorporated herein by reference to SunEdison’s and Vivint Solar’s respective historical SEC filings relate solely to their respective historical financial information. Such audit reports incorporated by reference herein do not extend to the Forecasts and should not be read to do so.

The Forecasts are not being included in this proxy statement to influence any Vivint Solar stockholder’s decision whether to vote to adopt the Merger Agreement, as amended, or whether to vote to approve any other proposal set forth herein, but rather because the Forecasts were used by the board of directors of Vivint Solar and Morgan Stanley in connection with the financial analysis of the Merger and the other transactions contemplated by the Merger Agreement and the Merger Agreement Amendment, as applicable.

You should not place undue reliance on the Forecasts set forth below. In addition, the Forecasts do not take into account any circumstances or events occurring after the date that they were prepared and do not give effect to the Merger. There can be no assurance that the results indicated in the Forecasts will be realized or that actual results will not be materially higher or lower than projected. Because the Forecasts set forth below cover multiple years, such information by its nature becomes less reliable with each successive year. The Forecasts may not be predictive of the future financial performance of SunEdison, Vivint Solar or the combined company, and, in fact, actual results of SunEdison, Vivint Solar and the combined company for the periods covered in the Forecasts may, and likely will, differ from the results indicated in the Forecasts and such differences could be material. Vivint Solar does not intend to, and disclaims any obligation to, update, correct, or otherwise revise the Forecasts

 

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to reflect circumstances existing or arising after the date such Forecasts were generated or to reflect the occurrence of future events, even if any or all of the assumptions or other information underlying the Forecasts are shown to be in error. The Forecasts included in this document are forward-looking statements that are also subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in the “Risk Factors” section of the documents incorporated by reference into this proxy statement. In addition, see “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 34.

The Forecasts were developed by Vivint Solar management for and were used by Vivint Solar’s financial advisor and Vivint Solar’s board of directors in connection with the evaluation of the Merger and the other transactions contemplated by the original Merger Agreement and the Merger Agreement Amendment, as applicable, and certain of these metrics were shared by Vivint Solar with SunEdison during negotiations and discussions leading to the execution of the Merger Agreement and the Merger Agreement Amendment. The metric titled “Total Projected Cash Flows” was not shared with SunEdison during negotiations and discussions leading to the execution of the original Merger Agreement or the Merger Agreement Amendment.

Important Information about the Forecasts

The inclusion of the summary of the Forecasts in this proxy statement should not be regarded as a representation of SunEdison or of Vivint Solar, or an indication that any of SunEdison or Vivint Solar or their respective affiliates, advisors or representatives considered, or now consider, any of the Forecasts to be a reliable prediction of actual future events or results and the Forecasts should not be relied upon as such. The Forecasts are subjective in many respects and thus subject to interpretation. As a result, these financial projections are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. While presented with numeric specificity, the Forecasts set forth below reflect numerous estimates and assumptions with respect to industry performance and competition, general U.S. and global business, economic, regulatory, market and financial conditions, commodity prices, availability of financing, environmental concerns and environmental laws and regulations, availability and size of government incentives, availability of supplies, the price of utility-generated electricity and electricity from other sources and other matters specific to the solar wafer, solar energy and wind energy industries, all of which are difficult to predict, inherently subject to error and in many cases are beyond the control of SunEdison, Vivint Solar or the combined company. The Forecasts reflect assumptions as to certain business decisions that are subject to change. The Forecasts also do not reflect any changes in SunEdison’s or Vivint Solar’s operations or strategy that may be implemented after the consummation of the Merger or any costs or obligations incurred by SunEdison or Vivint Solar in connection with the Merger and the subsequent integration of the operations of SunEdison and Vivint Solar.

None of Vivint Solar, SunEdison or any of their respective affiliates, advisors or representatives makes any representation to any stockholder of Vivint Solar or any other person regarding the ultimate performance of SunEdison, Vivint Solar or the combined company compared to the Forecasts, and none of them intends to disclose any update, reconciliation or revision to the Forecasts to reflect circumstances existing after the respective dates on which the Forecasts were prepared or to reflect the occurrence of future events, including any actual results of operations of Vivint Solar or the combined company, even if any or all of the assumptions underlying the Forecasts are shown to be in error. SunEdison and Vivint Solar have not made any representations to each other, in the original Merger Agreement, the Merger Agreement Amendment or otherwise, concerning the Forecasts or their accuracy for any purpose.

Vivint Solar’s management believes that the Forecasts were prepared in good faith and on a reasonable basis based on the best information available to its management team at the time of their preparation. The inclusion of the projections in this proxy statement should not be regarded as an indication that SunEdison or Vivint Solar or any of their respective affiliates, advisors, representatives, or any other recipient of this information considered or considers the projections to be predictive of actual future events, and the projections should not be relied upon as such.

 

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Certain Unaudited Financial Information Reviewed by Vivint Solar’s Board of Directors and Vivint Solar’s Financial Advisor

As a matter of course, Vivint Solar does not publicly disclose long-term financial or operating projections other than limited short-term guidance concerning select metrics in connection with its annual and quarterly earnings announcements. In connection with its evaluation of the Merger, Vivint Solar’s board of directors considered certain unaudited, non-public financial and operating projections of Vivint Solar as a standalone company for each of 2015, 2016 and 2017, described in greater detail below. Because such projections were prepared assuming Vivint Solar remains a standalone company, they do not give effect to the Merger or any related synergies.

In connection with the negotiation and discussion of the Merger, Vivint Solar’s management developed the Forecasts and shared them with Morgan Stanley. The Vivint Solar Forecasts that were delivered to management of SunEdison during negotiations and discussions prior to the execution of the Merger Agreement were delivered pursuant to the existing non-disclosure agreements between the parties and were not intended for public disclosure. As noted above, the Vivint Solar Forecasts described below were used by Morgan Stanley and Vivint Solar’s board of directors in connection with the evaluation of the Merger.

The projections were based on management’s beliefs and assumptions and on information that was available to management when the projections were made. Although Vivint Solar’s management believed that it had a reasonable basis for each of these estimates, these estimates are based on a combination of assumptions that may not prove to be accurate over time. Limitations on access to capital, changes to Vivint Solar’s business model, underperformance of the solar energy systems, payment defaults by Vivint Solar’s customers, cancellation of signed contracts, competition from other distributed solar energy companies, development in the distributed solar energy market and the energy market more broadly, technical innovation or other factors could cause Vivint Solar’s actual results to differ materially from its projections.

In light of the foregoing factors and the uncertainties inherent in financial and operating projections, stockholders are cautioned not to rely on such projections as predictive of future events.

The following tables present selected summary projections with respect to Vivint Solar prepared by its management.

Financial Projections made available to SunEdison prior to the

execution of the Merger Agreement in April 2015

 

     Year Ending December 31,  
         2015              2016      
     (in millions)  

Revenue

   $ 55.0       $ 112.4   

Total Operating Expenses

     256.1         351.0   

Loss from operations

     (201.1      (238.5

Loss before income taxes and non-controlling interests(1)

     (209.9      (256.5

 

(1) “Loss before income taxes and non-controlling interests” represents loss from operations less interest expense and other income/expense.

In addition, in April 2015, Vivint Solar provided SunEdison with cash flow estimates based on information requested to be included by SunEdison for the period beginning in 2016 through 2020 for systems projected to be installed as of December 31, 2015. Such estimates were not prepared for Vivint Solar’s internal use and were considered preliminary in nature.

 

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Sources and Uses Estimates made available to SunEdison

Prior to entering into the Merger Agreement, Vivint Solar also provided SunEdison with an estimate of monthly operating cash-flows, taking into account anticipated sources and uses of cash, for the period from July 2015 through March 2016.

In addition, prior to entering into the Merger Agreement Amendment, Vivint Solar provided SunEdison with an estimate of monthly operating cash-flows, taking into account anticipated sources and uses of cash, for the period from July 2015 through December 2016.

Financial Projections made available to Morgan Stanley prior to the execution of the Merger Agreement in July 2015

 

     Year Ending December 31,  
         2015              2016      
     (in millions)  

Revenue

   $ 58.2       $ 127.8   

Total operating expenses

     281.6         396.3   

Loss from operations

     (223.4      (268.5

Loss before income taxes and non-controlling interests(1)

     (234.3      (300.0

Net Loss

     (270.8      (330.0

 

(1) “Loss before income taxes and non-controlling interests” represents loss from operations less interest expense and other income/expense.

 

     Year Ending December 31,  
         2015              2016      
     (in millions)  

Net Cash used in operating activities

   $ (199.7    ($ 171.5

Net cash used in investing activities

     (680.5      (1,332.9

Net cash provided by financing activities

     715.6         1,724.0   

Net Cash Flows

   $ (164.6    $ 219.6   

Financial Projections made available to Morgan Stanley prior to the execution of the Merger

Agreement Amendment

 

     Year Ending December 31,  
         2015              2016      
     (in millions)  

Revenue

   $ 64.5       $ 112.2   

Total operating expenses

     277.1         302.0   

Loss from operations

     (212.6      (189.8

Loss before income taxes and non-controlling interests(1)

     (224.9      (217.6

Net Loss

     (252.2      (217.6

 

(1) “Loss before income taxes and non-controlling interests” represents loss from operations less interest expense and other income/expense.

 

     Year Ending December 31,  
         2015              2016      
     (in millions)  

Net Cash used in operating activities

     (217.5      (243.1

Net cash used in investing activities

     (551.7      (651.0

Net cash provided by financing activities

     603.4         838.4   

Net Cash Flows

   $ (165.8    $ (55.8

 

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Key Operating Metric made available to Vivint Solar’s board of directors, Morgan Stanley and

SunEdison prior to the execution of the Merger Agreement

 

     Year Ending December 31,  
       2015          2016          2017    

Megawatts Installed (MW)(1)

     300         600         1,020   

 

(1) “Megawatts Installed” represents the aggregate megawatt nameplate capacity of solar energy systems projected to be installed during the applicable period. Vivint Solar tracks the nameplate capacity of its solar energy systems as measured in megawatts DC STC, or direct current standard test conditions. Because the size of solar energy systems varies greatly, Vivint Solar believes that aggregate megawatt nameplate capacity of the systems is an indicator of its growth rate. Vivint Solar tracks historical megawatts installed in a given period as an indicator of asset growth in the period.

Key Operating Metric made available to SunEdison in October 2015, prior to the execution of

the Merger Agreement Amendment

 

     Year Ending December 31,  
         2015              2016      

Megawatts Installed (MW)(1)

     238         550   

 

(1) “Megawatts Installed” represents the aggregate megawatt nameplate capacity of solar energy systems projected to be installed during the applicable period. Vivint Solar tracks the nameplate capacity of its solar energy systems as measured in megawatts DC STC, or direct current standard test conditions. Because the size of solar energy systems varies greatly, Vivint Solar believes that aggregate megawatt nameplate capacity of the systems is an indicator of its growth rate. Vivint Solar tracks historical megawatts installed in a given period as an indicator of asset growth in the period.

On December 2, 2015 Vivint Solar advised SunEdison that it was revising its projections to between 229-232 Megawatts Installed for 2015.

Key Operating Metric made available to Vivint Solar’s board of directors and Vivint Solar’s financial

advisor in December 2015, prior to the execution of the Merger Agreement Amendment

 

     Year Ending December 31,  
     2015      2016      2017  

Megawatts Installed (MW)(1)

     229         350         500   

 

(1) “Megawatts Installed” represents the aggregate megawatt nameplate capacity of solar energy systems projected to be installed during the applicable period. Vivint Solar tracks the nameplate capacity of its solar energy systems as measured in megawatts DC STC, or direct current standard test conditions. Because the size of solar energy systems varies greatly, Vivint Solar believes that aggregate megawatt nameplate capacity of the systems is an indicator of its growth rate. Vivint Solar tracks historical megawatts installed in a given period as an indicator of asset growth in the period.

 

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Other Operating Metric made available to Vivint Solar’s financial advisor prior to the

execution of the Merger Agreement

 

     Total
Projected
Cash Flows
Over  30-Year
Period(1)(2)
 
     (in millions)  

Systems installed in 2015 and prior

   $ 1,319   

Systems installed in 2016

     1,341   

Systems installed in 2017

     2,415   

 

(1) “Total Projected Cash Flows” represents the sum of undiscounted net cash flows that Vivint Solar expects to receive from customers pursuant to long-term customer contracts and the estimated value of SRECs, net of estimated cash distributions to fund investors and estimated operating expenses (including operations, maintenance and administrative activities) and debt service costs for systems expected to be installed in the respective periods and over the course of the estimated 30 year useful life for the systems. The anticipated expenses include accounting, reporting, audit, insurance, maintenance and repairs. Vivint Solar also includes the replacement cost of inverters, which have a 10 to 20-year warranty, with an estimated 2% annual price decline from current pricing. Vivint Solar’s other costs and exposure related to this equipment is mainly covered by the applicable product’s warranty, which generally meet or exceed the life of the contract. Aside from the inverter replacement costs, Vivint Solar expects to incur routine operating costs which are mainly administrative in nature and estimated based on Vivint Solar’s experience in the normal course of business. Expected distributions to fund investors vary between the different funds and are based on individual fund contract provisions. These distributions are estimated based on contracted rates, expected sun hours, and the production capacity of the solar equipment installed. Total Projected Cash Flows includes the estimated value of SRECs over a 10-year period. This metric is different than retained value, one of Vivint Solar’s key operating metrics, because retained value discounts the value of the cash flows on a net present value basis, and does not include debt servicing costs or the estimated value of SRECs.
(2) In addition to Total Projected Cash Flows, Vivint Solar provided to Morgan Stanley estimated amounts for the following line-items in 2016 and 2017: General & Administrative and Other; Corporate Interest Expense; Change in Net Working Capital and Corporate Taxes (related to Vivint Solar). The net corporate expenses derived from the sum of these line items were $91 million for 2016 and $166 million for 2017.

Other Operating Metric made available to Vivint Solar’s financial advisor prior to the

execution of the Merger Agreement Amendment

 

     Total
Projected
Cash Flows
Over  30-Year
Period(1)
(2)
 
     (in millions)  

Systems installed in 2015 and prior

   $ 1,024   

Systems installed in 2016

     794   

Systems installed in 2017

     1,184   

 

(1)

“Total Projected Cash Flows” represents the sum of undiscounted net cash flows that Vivint Solar expects to receive from customers pursuant to long-term customer contracts and the estimated value of SRECs, net of estimated cash distributions to fund investors and estimated operating expenses (including operations, maintenance and administrative activities) and debt service costs for systems expected to be installed in the respective periods and over the course of the estimated 30 year useful life for the systems. The anticipated expenses include accounting, reporting, audit, insurance, maintenance and repairs. Vivint Solar also includes the replacement cost of inverters, which have a 10 to 20-year warranty, with an estimated 2% annual price decline from current pricing. Vivint Solar’s other costs and exposure related to this equipment is mainly

 

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  covered by the applicable product’s warranty, which generally meet or exceed the life of the contract. Aside from the inverter replacement costs, Vivint Solar expects to incur routine operating costs which are mainly administrative in nature and estimated based on Vivint Solar’s experience in the normal course of business. Expected distributions to fund investors vary between the different funds and are based on individual fund contract provisions. These distributions are estimated based on contracted rates, expected sun hours, and the production capacity of the solar equipment installed. Total Projected Cash Flows includes the estimated value of SRECs over a 10-year period. This metric is different than retained value, one of Vivint Solar’s key operating metrics, because retained value discounts the value of the cash flows on a net present value basis, and does not include debt servicing costs or the estimated value of SRECs.
(2) In addition to Total Projected Cash Flows, Vivint Solar provided to Morgan Stanley estimated amounts for the following line-items in 2016 and 2017: General & Administrative and Other; Corporate Interest Expense; Change in Net Working Capital and Corporate Taxes (related to Vivint Solar). The net corporate expenses derived from the sum of these line items were $207 million for 2016 and $100 million for 2017.

Regulatory Approvals Required for the Merger

Under the HSR Act, SunEdison and Vivint Solar were required to file notifications with the Premerger Notification Office of the FTC and the Antitrust Division of the DOJ and observe a mandatory waiting period before completing the Merger. On July 30, 2015, both SunEdison and Vivint Solar filed the required notification materials under the HSR Act. On August 13, 2015, the FTC and DOJ granted early termination of the waiting period under the HSR Act.

SunEdison and Vivint Solar have agreed to cooperate with each other and use their respective reasonable best efforts to cause the consummation of the Merger to occur, including using reasonable best efforts to take all actions reasonably necessary to comply promptly with all legal requirements that may be imposed on SunEdison or Vivint Solar, as applicable, or their respective subsidiaries with respect to the consummation of the Merger. This obligation includes the obligation to obtain all approvals and consents from any governmental entity or third party necessary, proper or advisable to consummate the Merger.

In addition to the antitrust-related filings and clearances discussed above and the filing with the SEC of this proxy statement, SunEdison and Vivint Solar must make any required filings and obtain any required approvals as may be required under the rules and regulations of the NYSE and must cause the filing and recordation of the certificate of merger with the Secretary of State of the State of Delaware pursuant to the DGCL. Other than the approvals discussed above, SunEdison and Vivint Solar are not required to obtain any additional consent, approval, license, permit, order or authorization of a governmental authority or action of, registration, declaration or filing with or notice to any governmental authority and no such consent, approval, license, permit, order, authorization, action, registration, declaration, filing or notice is a condition to the consummation of the Merger unless the failure to make or obtain such item, individually or in the aggregate, would reasonably be expected to result in a material adverse effect on the business, financial condition or results of operations of SunEdison or Vivint Solar, respectively, and its respective subsidiaries, taken as a whole, or that would prevent Vivint Solar or SunEdison and Merger Sub from consummating the transactions contemplated by the Merger Agreement. SunEdison and Vivint Solar do not believe that the failure to receive any such regulatory approvals, other than any required approvals from the NYSE and the filing and recordation of the certificate of merger with the Secretary of State of the State of Delaware, would reasonably be expected to result in a material adverse effect on SunEdison or Vivint Solar. The parties will work diligently to respond to outstanding requests and inquiries by government agencies in an effort to secure clearance for the Merger.

Notwithstanding the termination of the waiting period under the HSR Act, SunEdison and Vivint Solar cannot make assurances that the FTC, the DOJ or other government agencies, including state attorneys general, or the NYSE or private parties will not initiate actions to challenge the Merger before or after it is completed. Any such challenge to the Merger could result in a court order enjoining the Merger or in restrictions or conditions that would have a material adverse effect on the combined company if the Merger is completed. Such restrictions and

 

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conditions could include requiring the divestiture or spin-off of assets or businesses. Under the terms of the Merger Agreement, SunEdison is required to commit to any divestitures or similar arrangements with respect to the assets or business of SunEdison or any of its subsidiaries or affiliates or of Vivint Solar or any of its subsidiaries, affiliates or joint ventures if that divestiture or arrangement is required as a condition to obtaining any clearance required under the HSR Act, but no such divestiture or similar arrangement will be required if such action would, individually or in the aggregate, have a material adverse effect on SunEdison, Vivint Solar and their respective subsidiaries and affiliates, taken as a whole, following the consummation of the transactions contemplated by the Merger Agreement. No additional stockholder approval of Vivint Solar is expected to be required or sought for any decision made by SunEdison or Vivint Solar after the Special Meeting of Stockholders.

Material U.S. Federal Income Tax Consequences of the Merger

The following is a discussion of the material U.S. federal income tax consequences of the Merger applicable to U.S. Holders (as defined below) of Vivint Solar common stock that exchange their shares of Vivint Solar common stock for their portion of the Merger Consideration in the Merger and the ownership of SunEdison common stock and the Convertible Notes, but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or foreign tax laws are not discussed. This discussion is based on the Code, U.S. Treasury regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the IRS in effect as of the date of the Merger. These authorities may change, possibly with retroactive effect, and any such change could affect the accuracy of the statements and conclusions set forth in this discussion.

This discussion is limited to U.S. Holders who hold their Vivint Solar common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to the particular circumstances of a U.S. Holder of Vivint Solar common stock. In addition, it does not address consequences relevant to holders of Vivint Solar common stock that are subject to particular rules, including, without limitation:

 

    persons subject to the alternative minimum tax or the tax net investment income;

 

    persons whose functional currency is not the U.S. dollar;

 

    persons holding Vivint Solar common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;

 

    persons who are not U.S. Holders;

 

    banks, insurance companies and other financial institutions;

 

    real estate investment trusts or regulated investment companies;

 

    brokers or dealers in securities, commodities or foreign currencies;

 

    traders in securities that elect to apply a mark-to-market method of accounting;

 

    S corporations, partnerships, or other entities or arrangements treated as partnerships for U.S. federal income tax purposes or investors in such entities;

 

    tax-exempt organizations or governmental organizations;

 

    persons deemed to sell Vivint Solar common stock under the constructive sale provisions of the Code;

 

    mutual funds;

 

    controlled foreign corporations, passive foreign investment companies, former citizens or residents of the United States, or U.S. expatriates;

 

    persons who hold or receive Vivint Solar common stock pursuant to the exercise of any employee stock options, through a tax-qualified retirement plan or otherwise as compensation;

 

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    persons who exercise appraisal rights;

 

    persons whose shares of Vivint Solar common stock are restricted by law from sale on an established securities market;

 

    persons who actually or constructively own more than 5% of Vivint Solar common stock; and

 

    tax-qualified retirement plans.

If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) holds Vivint Solar common stock, the tax treatment of a partner in the partnership generally will depend on the status of the partner, the activities of the partnership, and certain determinations made at the partner level. Accordingly, partnerships holding Vivint Solar common stock and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences of the Merger to their specific circumstances.

For purposes of this discussion, the term “U.S. Holder” means a beneficial owner of Vivint Solar common stock that is for U.S. federal income tax purposes (1) an individual citizen or resident of the United States, (2) a corporation, or entity treated as a corporation for U.S. federal income tax purposes, (3) a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) such trust has a valid election in effect to be treated as a U.S. person for U.S. federal income tax purposes or (4) an estate, the income of which is subject to U.S. federal income taxation regardless of its source.

Determining the actual tax consequences of the Merger to you may be complex and will depend on your specific situation and on factors that are not within SunEdison’s control. You should consult your own independent tax advisor as to the specific tax consequences of the Merger in your particular circumstances and the ownership of SunEdison common stock and Convertible Notes received in the Merger, including the applicability and effect of the alternative minimum tax and any state, local, foreign and other tax laws and of changes in those laws.

Exchange of Vivint Solar Common Stock Solely for Cash Consideration

A U.S. Holder’s receipt of cash in exchange for Vivint Solar common stock in the Merger will be a taxable transaction for U.S. federal income tax purposes. Accordingly, such U.S. Holder generally will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between (1) the amount of cash received by such holder in the Merger and (2) such holder’s adjusted tax basis in the shares of Vivint Solar common stock exchanged therefor in the Merger.

Any such gain or loss generally will be capital gain or loss and will be long-term capital gain or loss if the U.S. Holder’s holding period in the Vivint Solar common stock immediately prior to the Merger is more than one year. The amount and character of gain or loss must be calculated separately for each identifiable block of shares (generally, shares purchased at the same time in the same transaction) of Vivint Solar common stock surrendered. For U.S. Holders that are individuals, estates or trusts, long-term capital gain generally is taxed at preferential U.S. federal rates. The deductibility of capital losses is subject to certain limitations. Each U.S. Holder is urged to consult its tax advisor regarding the manner in which gain or loss should be calculated as a result of the Merger.

Exchange of Vivint Solar Common Stock for Cash, Shares of SunEdison Common Stock and Convertible Notes

Tax Treatment of the Merger

A U.S. Holder’s receipt of cash, shares of SunEdison common stock and the Convertible Notes in exchange for Vivint Solar common stock in the Merger (such U.S. Holders, after delivery of the Notice, not to include any Public Stockholders) will be a taxable transaction for U.S. federal income tax purposes. Accordingly, such U.S. Holder generally will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the

 

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difference between (1) the sum of (a) the amount of cash received by such holder in the Merger and (b) the fair market value, at the Effective Time, of the shares of SunEdison common stock and the issue price of the Convertible Notes received by such holder in the Merger, and (2) such holder’s adjusted tax basis in the shares of Vivint Solar common stock exchanged therefor in the Merger.

Any such gain or loss generally will be capital gain or loss and will be long-term capital gain or loss if the U.S. Holder’s holding period in the Vivint Solar common stock immediately prior to the Merger is more than one year. The amount and character of gain or loss must be calculated separately for each identifiable block of shares (generally, shares purchased at the same time in the same transaction) of Vivint Solar common stock surrendered. For U.S. Holders that are individuals, estates or trusts, long-term capital gain generally is taxed at preferential U.S. federal rates. The deductibility of capital losses is subject to certain limitations. Each U.S. Holder is urged to consult its tax advisor regarding the manner in which gain or loss should be calculated as a result of the Merger.

Under Section 453 of the Code, the installment method of reporting any gain from the exchange of the Merger Consideration for Vivint Solar common stock (including any gain attributable to receipt of a Convertible Note) will not be available to U.S. Holders because Vivint Solar common stock is traded on an established securities market. As such, a U.S. Holder will recognize gain, if any, from the exchange of the Merger Consideration for Vivint Solar common stock in the year of the Effective Time.

The U.S. Holder’s tax basis in shares of SunEdison common stock or Convertible Notes received in the Merger will equal the fair market value of such SunEdison common stock and the issue price of such Convertible Notes at the Effective Time and the holding period for such shares and Convertible Notes will begin on the date immediately following the Effective Time.

Consequences of Holding SunEdison Common Stock

Distributions to U.S. Holders on SunEdison common stock received in the Merger that are paid out of SunEdison’s current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) will be treated as dividends for U.S. federal income tax purposes. Dividends received by individual U.S. Holders with respect to SunEdison common stock generally should qualify as “qualified dividend income” eligible for a reduced tax rate so long as certain holding period requirements are met. Dividends paid on SunEdison common stock generally will be eligible for the dividends received deduction if the U.S. Holder is an otherwise qualifying corporate holder that meets the holding period and other requirements for the dividends received deduction. Any distributions not constituting a dividend will be treated first as reducing the adjusted basis in the U.S. Holder’s shares of SunEdison common stock and, to the extent such distribution exceeds the adjusted basis in the U.S. Holder’s shares of SunEdison common stock, as gain from the sale or exchange of such stock.

Upon the sale or other taxable disposition of SunEdison common stock received in the Merger, a U.S. Holder generally will recognize gain or loss equal to the difference between the amount realized on such sale or taxable disposition and the U.S. Holder’s adjusted tax basis in the shares of SunEdison common stock sold. Any such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the U.S. Holder’s holding period in the shares of SunEdison common stock sold is more than one year. For U.S. Holders that are individuals, estates or trusts, long-term capital gain generally is taxed at a preferential U.S. federal rate. The deductibility of capital losses is subject to certain limitations.

Consequences of Holding Convertible Notes

Interest. Interest received by a U.S. Holder on a Convertible Note will generally be taxable to the U.S. Holder as ordinary income at the time it is paid or accrued in accordance with such holder’s usual method of accounting for U.S. federal income tax purposes.

Distributions. The conversion rate of the Convertible Notes will be adjusted in certain circumstances as described in “Description of Convertible Notes—Conversion Rate; Adjustments.” Adjustments to the conversion

 

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rate made pursuant to a reasonable adjustment formula which has the effect of preventing dilution of the interests of the holders of the Convertible Notes generally will not be considered to result in a constructive distribution of stock. Other adjustments (or failures to make adjustments) to the conversion rate that have the effect of increasing a U.S. Holder’s proportionate interest in our assets or earnings and profits may in some circumstances result in a constructive distribution to such U.S. Holder. Any constructive distributions will be taxable as a dividend to the extent of current or accumulated earnings and profits of SunEdison to holders of the Convertible Notes for U.S. federal income tax purposes, notwithstanding the fact that the holders of the Convertible Notes do not receive an actual distribution of cash or property. U.S. Holders of the Convertible Notes are urged to consult their tax advisors with respect to the U.S. federal income tax consequences resulting from an adjustment to (or failure to adjust) the conversion rate of the Convertible Notes.

Exchange of Convertible Notes. The tax treatment of the exchange of Convertible Notes for SunEdison common stock depends on whether the Convertible Notes are treated as securities for U.S. federal income tax purposes. The term “security” is not defined in the Code or in the Treasury Regulations and has not been clearly defined by judicial decisions. The determination of whether a particular debt obligation constitutes a security depends on an evaluation of the overall nature of the debt obligation. One of the most significant factors considered in determining whether a particular debt obligation is a security is its original term. In general, debt obligations issued with a maturity at issuance of less than five years do not constitute securities, whereas debt obligations with a maturity at issuance of ten years or more constitute securities.

Convertible Notes Treated as Securities. If the Convertible Notes constitute securities for U.S. federal income tax purposes, the conversion of Convertible Notes into shares of SunEdison common stock will be a tax-free “recapitalization” for U.S. federal income tax purposes. Accordingly, if you are a U.S. Holder of Convertible Notes, you generally will not recognize gain or loss on the receipt of shares in exchange for your Convertible Notes. The adjusted tax basis of SunEdison common stock received on conversion (including any fractional shares deemed to be received) should equal the adjusted tax basis of the Convertible Notes converted (less any basis attributable to accrued but unpaid interest) and the holding period of such common stock received on conversion should generally include the period during which the Convertible Notes were held.

Under regulations to be prescribed by the U.S. Treasury Department, rather than being included in income currently, any accrued market discount on your Convertible Notes (to the extent not previously included by you as ordinary income) would be taxed as ordinary income upon your sale or other disposition of the shares of SunEdison Common Stock received in exchange for those Convertible Notes. Market discount is the excess, as of the date of your acquisition of a Convertible Note, of the Convertible Note’s stated redemption price at maturity over your tax basis in the Convertible Note, subject to a de minimis rule. Market discount, if any, accrues ratably from the date you purchase a Convertible Note until its final maturity.

Convertible Notes Not Treated as Securities. If it is determined that the Convertible Notes are not “securities,” the conversion of Convertible Notes to shares of SunEdison common stock should be a taxable event for U.S. federal income tax purposes. In that case, if you are a U.S. Holder of Convertible Notes, you will recognize net gain or loss on such exchange in an amount equal to the difference between the fair market value of the shares received upon conversion and your adjusted tax basis in the Convertible Notes exchanged (less any basis attributable to accrued but unpaid interest). Any gain or loss recognized on the exchange generally will be capital gain or loss. Capital gain of a non-corporate U.S. Holder is eligible to be taxed at reduced rates where the property is held for more than one year. The deductibility of capital losses is subject to limitations.

Gain attributable to accrued market discount as of the date of the conversion not previously included in income will be includible in your gross income as ordinary income and, if you are a non-corporate U.S. Holder that has held Convertible Notes for more than one year, will generally be subject to tax at a higher rate than the capital gain rate that otherwise would have applied to such gain.

 

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Your initial tax basis in shares of SunEdison common stock received pursuant to the conversion will equal the fair market value of those shares on the date of the conversion and your holding period for those shares will begin on the day following the date of the exchange.

Information Reporting and Backup Withholding

In general, payments received in connection with the exchange of Vivint Solar common stock in the Merger, payments of dividends on, and proceeds of a disposition of, shares of SunEdison common stock received in the Merger, the payment of interest, OID, principal, and premium, if any, paid on the Convertible Notes received in the Merger, and the proceeds of a sale, redemption or conversion of Convertible Notes received in the Merger may be reported to the IRS.

Backup withholding, currently at a rate of 28%, may apply with respect to such payments unless the U.S. Holder receiving such a payment (1) is an exempt holder (generally, a corporation, tax-exempt organization, qualified pension or profit-sharing trust, individual retirement account, or nonresident alien individual who or which, when required, certifies as to his, her or its status) or (2) provides a certificate (generally on IRS Form W-9) containing the holder’s name, address, correct federal taxpayer identification number and a statement that the holder is a U.S. person and is not subject to backup withholding and otherwise complies with applicable requirements of the backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowable as a refund or credit against a holder’s U.S. federal income tax liability provided the required information is timely furnished to the IRS.

The discussion of the material U.S. federal income tax consequences set forth above is not a complete description of all of the consequences of the Merger. U.S. Holders of Vivint Solar common stock are strongly urged to consult their tax advisors regarding the tax consequences of the Merger to them, including the effects of U.S. federal, state, local, foreign, and other tax laws.

Accounting Treatment

SunEdison prepares its financial statements in accordance with GAAP. The Merger will be accounted for using the acquisition method of accounting in accordance with ASC 805, with SunEdison being considered the acquirer of Vivint Solar for accounting purposes. Accordingly, Vivint Solar’s identifiable assets acquired and liabilities assumed will be recognized at their estimated fair values as of the Closing Date. Goodwill will be measured as the excess of the fair value of the consideration transferred in the Merger over the fair value of the identifiable net assets. As of the date of this proxy statement, SunEdison has not performed the detailed valuation studies necessary to arrive at the required estimates of the fair value of the Vivint Solar assets to be acquired and the liabilities to be assumed, nor has it identified all adjustments necessary to conform Vivint Solar’s accounting policies to SunEdison’s accounting policies. Additionally, a final determination of the fair value of Vivint Solar’s assets and liabilities, which cannot be made prior to the Closing Date, will be based on the identifiable net tangible and intangible assets and liabilities of Vivint Solar that exist as of the Closing Date. Goodwill is not amortized but is tested for impairment at least annually.

Listing of SunEdison Common Stock; Delisting of Vivint Solar Common Stock and Issuance of Convertible Notes

It is a condition to the consummation of the Merger that the shares of SunEdison common stock to be issued to Vivint Solar stockholders pursuant to the Merger Agreement be approved for listing on the NYSE, subject to official notice of issuance, prior to the Closing Date.

Prior to the Closing Date, upon SunEdison’s request, Vivint Solar will take all reasonable actions to cause the delisting of Vivint Solar common stock from the NYSE and the termination of Vivint Solar’s registration under the Exchange Act as soon as practicable following the Effective Time.

At or prior to the Closing Date, SunEdison shall cause the Indenture to be executed by and between SunEdison and the Trustee and delivered to Vivint Solar.

 

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At all times following the consummation of the Merger, SunEdison will reserve and keep available, free of preemptive rights, shares of SunEdison common stock for the purpose of enabling SunEdison to satisfy any obligation to issue shares of SunEdison common stock upon conversion of the Convertible Notes to be issued in the Merger.

Appraisal Rights of Dissenting Vivint Solar Stockholders

Under the DGCL, if you do not wish to accept the per share Merger Consideration provided for in the Merger Agreement, you have the right to seek appraisal of your shares of Vivint Solar common stock and to receive payment for the fair value of your shares of Vivint Solar common stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court of Chancery, together with interest, if any, to be paid upon the amount determined to be fair value. These rights are known as appraisal rights. The “fair value” of your shares of Vivint Solar common stock as determined by the Delaware Court of Chancery may be more, less than or the same as, the Merger Consideration per share that you are otherwise entitled to receive under the terms of the Merger Agreement. Vivint Solar stockholders who do not vote in favor of the proposal to adopt the Merger Agreement, who properly demand appraisal for their shares of Vivint Solar common stock in compliance with the provisions of Section 262 of the DGCL (“Section 262”) and who hold of record shares of Vivint Solar common stock through the Effective Time and do not otherwise withdraw or lose the right to appraisal under Delaware law will be entitled to appraisal rights. Strict compliance with the statutory procedures in Section 262 is required. Failure to follow any of the statutory requirements precisely will result in the loss of your appraisal rights.

This section is intended only as a brief summary of the material provisions of the Delaware statutory procedures that a stockholder must follow in order to seek and perfect appraisal rights with respect to a merger agreement submitted for adoption at a meeting of stockholders. This summary is not a complete statement of all applicable requirements and the law pertaining to appraisal rights under the DGCL, and is qualified in its entirety by reference to Section 262, the full text of which appears in Annex N to this proxy statement. The following summary does not constitute any legal or other advice, nor does it constitute a recommendation that stockholders exercise their appraisal rights under Section 262.

Under Section 262, when a merger agreement is to be submitted for adoption at a meeting of stockholders, the company submitting the matter to a vote of stockholders must notify the stockholders that appraisal rights will be available not less than twenty days before the meeting to vote on the transaction. A copy of Section 262 must be included with such notice. This proxy statement constitutes Vivint Solar’s notice to its stockholders that appraisal rights are available in connection with the Merger and the full text of Section 262 is attached to this proxy statement as Annex N in compliance with the requirements of Section 262. If you wish to consider exercising your appraisal rights, you should carefully review the text of Section 262 contained in Annex N. Failure to comply timely and properly with the requirements of Section 262 will result in the loss of your appraisal rights under the DGCL. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of Vivint Solar common stock, Vivint Solar believes that if a stockholder is considering exercising such rights, such stockholder should seek the advice of legal counsel.

If you wish to demand appraisal of your shares of Vivint Solar common stock, you must satisfy each of the following conditions: (i) you must deliver to Vivint Solar a written demand for appraisal of your shares of Vivint Solar common stock before the vote is taken to approve the proposal to adopt the Merger Agreement, which must reasonably inform Vivint Solar of the identity of the holder of record of shares of Vivint Solar common stock who intends to demand appraisal of his, her or its shares of Vivint Solar common stock; and (ii) you must not vote or submit a proxy in favor of the proposal to adopt the Merger Agreement.

If you fail to comply with either of these conditions and the Merger is completed, you will be entitled to receive payment for your shares of Vivint Solar common stock as provided for in the Merger Agreement, but you will have no appraisal rights with respect to your shares of Vivint Solar common stock. A holder of shares of

 

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Vivint Solar common stock wishing to exercise appraisal rights must hold of record the shares of Vivint Solar common stock on the date the written demand for appraisal is made and must continue to hold such shares of Vivint Solar common stock of record through the Effective Time, because appraisal rights will be lost if such shares of Vivint Solar common stock are transferred prior to the Effective Time. A proxy that is submitted and does not contain voting instructions will, unless revoked, be voted in favor of the proposal to adopt the Merger Agreement, and it will constitute a waiver of the stockholder’s right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder who submits a proxy and who wishes to exercise appraisal rights must either submit a proxy containing instructions to vote against the proposal to adopt the Merger Agreement or abstain from voting on the proposal to adopt the Merger Agreement. Voting against or failing to vote for the proposal to adopt the Merger Agreement by itself does not constitute a demand for appraisal within the meaning of Section 262. The written demand for appraisal must be in addition to and separate from any proxy or vote on the proposal to adopt the Merger Agreement.

All demands for appraisal should be addressed to Vivint Solar’s Corporate Secretary, 3301 N. Thanksgiving Way, Suite 500 Lehi, Utah 84043, and must be delivered before the vote is taken to approve the proposal to adopt the Merger Agreement at the Special Meeting of Stockholders. The demand must reasonably inform Vivint Solar of the identity of the stockholder and the intention of the stockholder to demand appraisal of the “fair value” of his, her or its shares of Vivint Solar common stock. A stockholder’s failure to make the written demand prior to the taking of the vote on the adoption of the Merger Agreement at the Special Meeting of Stockholders of Vivint Solar will constitute a waiver of appraisal rights.

Only a holder of record of shares of Vivint Solar common stock is entitled to demand an appraisal of the shares registered in that holder’s name. Accordingly, to be effective, a demand for appraisal by a stockholder of Vivint Solar common stock must be made by, or in the name of, the record stockholder, fully and correctly, as the stockholder’s name appears on the stockholder’s stock certificate(s), or in the transfer agent’s records in the case of uncertificated shares, should specify the stockholder’s mailing address and the number of shares registered in the stockholder’s name, and must state that the person intends thereby to demand appraisal of the stockholder’s shares in connection with the Merger. The demand cannot be made by the beneficial owner if he or she does not also hold the shares of Vivint Solar common stock of record. The beneficial holder must, in such cases, have the registered owner, such as a broker, bank or other nominee, submit the required demand with respect to those shares of Vivint Solar common stock. If you hold your shares of Vivint Solar common stock through a broker, bank or other nominee and you wish to exercise appraisal rights, you should consult with your broker, bank or other nominee to determine the appropriate procedures for the making of a demand for appraisal by the nominee.

If shares of Vivint Solar common stock are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of a demand for appraisal should be made in that capacity. If the shares of Vivint Solar common stock are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or for all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, he or she is acting as agent for the record owner. A record owner, such as a broker, bank or other nominee, who holds shares of Vivint Solar common stock as a nominee for others, may exercise his or her right of appraisal with respect to the shares of Vivint Solar common stock held for one or more beneficial owners, while not exercising this right for other beneficial owners. In that case, the written demand should state the number of shares of Vivint Solar common stock as to which appraisal is sought. Where no number of shares of Vivint Solar common stock is expressly mentioned, the demand will be presumed to cover all shares of Vivint Solar common stock held in the name of the record owner.

Within ten days after the Effective Time, the surviving corporation in the Merger must give written notice of the effective date of the Merger to each stockholder of the acquired corporation who has properly filed a written demand for appraisal and who did not vote in favor of the proposal to adopt the Merger Agreement. At any time

 

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within sixty days after the Effective Time, any stockholder who has not commenced an appraisal proceeding or joined a proceeding as a named party may withdraw the demand and accept the consideration specified by the Merger Agreement for that stockholder’s shares of Vivint Solar common stock by delivering to the surviving corporation a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than sixty days after the Effective Time will require written approval of the surviving corporation. Unless the demand is properly withdrawn by the stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party within sixty days after the effective date of the Merger, no appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the approval of the Delaware Court of Chancery, with such approval conditioned upon such terms as the court deems just. If the surviving corporation does not approve a request to withdraw a demand for appraisal when that approval is required, or, except with respect to any stockholder who withdraws such stockholder’s right to appraisal in accordance with the proviso in the immediately preceding sentence, if the Delaware Court of Chancery does not approve the dismissal of an appraisal proceeding, the stockholder will be entitled to receive only the appraised value determined in any such appraisal proceeding, which value could be less than, equal to or more than the consideration offered pursuant to the Merger Agreement.

Within 120 days after the Effective Time, but not thereafter, either the surviving corporation or any stockholder who has complied with the requirements of Section 262 and is entitled to appraisal rights under Section 262 may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares of Vivint Solar common stock held by all stockholders entitled to appraisal. Upon the filing of the petition by a stockholder, service of a copy of such petition shall be made upon the surviving corporation. The surviving corporation has no obligation to file such petition and has no present intention to file a petition and holders should not assume that the surviving corporation will file a petition. In the event that the surviving corporation does not file such petition, it is the obligation of the holders of Vivint Solar common stock to initiate all necessary action to perfect their appraisal rights with respect to shares of Vivint Solar common stock within the time prescribed in Section 262. The failure of a stockholder to file such a petition within the period specified in Section 262 could nullify the stockholder’s previous written demand for appraisal. In addition, within 120 days after the Effective Time, any stockholder who has properly filed a written demand for appraisal and who did not vote in favor of the Merger Agreement will be entitled to receive from the surviving corporation, upon written request, a statement setting forth the aggregate number of shares of Vivint Solar common stock not voted in favor of the Merger Agreement and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. The statement must be mailed within ten days after such written request has been received by the surviving corporation or within ten days after the expiration of the period for delivery of demands for appraisal, whichever is later. A person who is the beneficial owner of shares of Vivint Solar common stock held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition for appraisal or request from the surviving corporation such statement.

If a petition for appraisal is duly filed by a stockholder and a copy of the petition is delivered to the surviving corporation, then the surviving corporation will be obligated, within twenty days after receiving service of a copy of the petition, to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal of their shares of Vivint Solar common stock and with whom agreements as to the value of their shares of Vivint Solar common stock have not been reached. After notice to stockholders who have demanded appraisal, if such notice is ordered by the Delaware Court of Chancery, the Delaware Court of Chancery is empowered to conduct a hearing upon the petition and to determine those stockholders who have complied with Section 262 and who have become entitled to the appraisal rights provided by Section 262. The Delaware Court of Chancery may require stockholders who have demanded payment for their shares of Vivint Solar common stock to submit their stock certificates to the Register in Chancery for notation of the pendency of the appraisal proceedings; and if any stockholder fails to comply with that direction, the Delaware Court of Chancery may dismiss the proceedings as to that stockholder.

 

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After determination of the stockholders entitled to appraisal of their shares of Vivint Solar common stock, the Delaware Court of Chancery will appraise the shares of Vivint Solar common stock, determining their fair value as of the Effective Time after taking into account all relevant factors exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. When the fair value has been determined, the Delaware Court of Chancery will direct the payment of such value upon surrender by those stockholders of the certificates representing their shares of Vivint Solar common stock. Unless the Court in its discretion determines otherwise for good cause shown, interest from the effective date of the Merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time and the date of payment of the judgment.

Neither Vivint Solar nor SunEdison anticipates offering more than the per share Merger consideration to any stockholder exercising appraisal rights and each of Vivint Solar and SunEdison reserves the right to assert, in any appraisal proceeding, that, for purposes of Section 262, the “fair value” of a share of Vivint Solar common stock is less than the per share Merger consideration. In determining “fair value,” the court is required to take into account all relevant factors. In Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983), the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court has stated that in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. An opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a merger is not an opinion as to, and does not in any manner address, fair value under Section 262 of the DGCL. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., 634 A.2d 345 (Del. 1993), the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Delaware Supreme Court also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.” In addition, the Delaware Courts have decided that the statutory appraisal remedy, depending on factual circumstances, may or may not be a dissenting stockholder’s exclusive remedy.

Costs of the appraisal proceeding may be determined by the Delaware Court of Chancery and imposed upon the surviving corporation and the stockholders participating in the appraisal proceeding by the Delaware Court of Chancery, as it deems equitable in the circumstances. Upon the application of a stockholder, the Delaware Court of Chancery may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts used in the appraisal proceeding, to be charged pro rata against the value of all shares of Vivint Solar common stock entitled to appraisal. Any stockholder who demanded appraisal rights will not, after the Effective Time, be entitled to vote shares of Vivint Solar common stock subject to that demand for any purpose or to receive payments of dividends or any other distribution with respect to those shares of Vivint Solar common stock, other than with respect to payment as of a record date prior to the Effective Time. If no petition for appraisal is filed within 120 days after the Effective Time, or if the stockholder otherwise fails to perfect his or her appraisal rights, successfully withdraws or loses such stockholder’s right to appraisal, then the right of that stockholder to appraisal will cease and that stockholder’s shares of Vivint Solar common stock will be deemed to have been converted at the Effective Time into the right to receive the Merger Consideration pursuant to the Merger Agreement. In addition, as indicated above, a stockholder may withdraw his, her or its demand for appraisal in accordance with Section 262 and accept the Merger Consideration offered pursuant to the Merger Agreement.

 

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Failure to comply strictly with all of the procedures set forth in Section 262 of the DGCL will result in the loss of a stockholder’s statutory appraisal rights. In the event of any conflict between this section and the provisions of the DGCL, the DGCL shall govern. In view of the complexity of Section 262 of the DGCL, Vivint Solar stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors.

Restrictions on Sales of Shares of SunEdison Common Stock Received in the Merger

The shares of SunEdison common stock to be issued to 313 in connection with the Merger will initially not be issued in an offering that is registered under the Securities Act and such shares of SunEdison common stock that 313 receives in connection with the Merger may only be sold pursuant to:

 

    an effective registration statement under the Securities Act covering the resale of those shares;

 

    an exemption under paragraph (d) of Rule 145 under the Securities Act; or

 

    any other applicable exemption under the Securities Act.

This proxy statement does not register the resale of shares of SunEdison common stock to be received by affiliates of Vivint Solar in the Merger.

Interests of Vivint Solar’s Directors and Executive Officers in the Merger

When considering the recommendation of the Vivint Solar board of directors that you vote to adopt the Merger Agreement, you should be aware that Vivint Solar’s directors and executive officers have economic interests in the Merger that are different from, or in addition to, the interests of stockholders generally, as more fully described below. The Vivint Solar board of directors was aware of and considered these interests to the extent that they existed at the time, among other matters, in approving the Merger Agreement and the Merger and recommending that the Merger Agreement be adopted by stockholders. The consummation of the Merger will constitute a “change in control,” a “change of control” and/or any term of similar meaning discussed in this section. The executive officers of Vivint Solar are Messrs. Gregory S. Butterfield, Dana C. Russell, L. Chance Allred, Paul S. Dickson, Dwain A. Kinghorn, Shawn J. Lindquist and Thomas G. Plagemann.

In addition, certain members of Vivint Solar’s board of directors are affiliated with 313 and/or Blackstone, whose affiliated fund controls 313. Accordingly, such members of Vivint Solar’s board of directors may have an indirect interest in the portion of the Merger Consideration to be paid to 313, which is different from the Merger Consideration to be paid in respect of Public Shares as described above.

Treatment of Equity Awards Held by Executive Officers and Directors

All of Vivint Solar’s executive officers hold Vivint Solar equity awards and participate in Vivint Solar equity plans. Messrs. D’Alessandro and Tibbetts are the only Vivint Solar directors who hold Vivint Solar equity awards and participate in Vivint Solar equity plans. Immediately prior to the completion of the Merger, each outstanding option or RSU that provides for accelerated vesting upon the completion of the transactions contemplated by the Merger Agreement will vest and be treated as a vested option or vested RSU. As of December 8, 2015, there were 9,276,629 outstanding stock options with exercise prices ranging from $1.00 per share to $16.00 per share, of which 6,616,911 were held by Vivint Solar’s directors and executive officers. As of December 8, 2015, there were 910,037608 outstanding RSUs, of which 18,374 were held by Vivint Solar’s directors and executive officers.

 

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Vested Options

As described under “The Merger—Treatment of Vivint Solar Equity Awards,” subject to any written agreement between the relevant holder and Vivint Solar and/or SunEdison (including as to certain options held by certain members of Vivint Solar’s management team that will be subject to additional vesting, as described herein), at the Effective Time, each option to acquire shares of Vivint Solar common stock that is outstanding, vested and unexercised as of immediately prior to the Effective Time or that vests as a result of the occurrence of the Effective Time will, without any action on the part of SunEdison, Merger Sub, Vivint Solar or the holder thereof, other than Vivint Solar delivering any notices required pursuant to the terms of the applicable Vivint Solar equity plan, be converted into and become a right to receive the Option Payment equal to the product of: (i) the aggregate number of shares of Vivint Solar common stock subject to such option immediately prior to the Effective Time and (ii) an amount equal to the excess, if any, of (1) the Public Cash Consideration less (2) the exercise price per share of such option.

Under the terms of the options granted to Vivint Solar’s executive officers, all unvested time based options and unvested performance based options will fully vest upon consummation of the Merger.

Each then outstanding and unvested option immediately prior to the Effective Time that is held by a non-employee director or person who will not continue to provide services to Vivint Solar or any subsidiary on or after the Effective Time will vest in full as of immediately prior to the Effective Time and be treated as a vested option.

Notwithstanding the foregoing, certain members of management, including Vivint Solar’s executive officers, entered into amendments to their involuntary termination protection agreements or employment agreements as described below, which, among other things, subject certain of their options to additional vesting. Specifically, thirty percent (30%) of Mr. Butterfield’s options to purchase shares of Vivint Solar common stock and twenty percent (20%) of Messrs. Russell’s, Allred’s, Dickson’s, Kinghorn’s and Plagemann’s options to purchase shares of Vivint Solar common stock, whether vested or unvested, will be converted into an unvested option to purchase shares of SunEdison common stock. The options to purchase SunEdison common stock will vest fifty percent (50%) on each of the first and second anniversaries of the Effective Time; provided that one hundred percent (100%) will vest upon the executive officer’s termination of employment by Vivint Solar for any reason other than “cause” or if applicable, by the executive officer for “good reason” (as defined in the applicable amendment). For each of the following executive officers, the estimated value of the options that are currently vested or scheduled to vest before the assumed Effective Time after taking into account the amendments described in the previous paragraph (with the value of each vested option to be calculated based on $         minus the applicable exercise price for the options) is: Mr. Butterfield $             , Mr. Russell $             , Mr. Allred $         , Mr. Dickson $             , Mr. Kinghorn $             , Mr. Lindquist $         and Mr. Plagemann $             .

No director holds outstanding options to purchase Vivint Solar common stock.

Vested Restricted Stock Units

As described under “The Merger—Treatment of Vivint Solar Equity Awards,” subject to any written agreement between the relevant holder and Vivint Solar and/or SunEdison, each outstanding RSU (or portion thereof) to be settled in shares of Vivint Solar common stock that becomes vested as a result of the consummation of the Merger will be treated as a share of Vivint Solar common stock and be converted into the right to receive the Merger Consideration.

Each then outstanding and unvested RSU immediately prior to the Effective Time that is held by a non-employee director or person who shall not continue to provide services to Vivint Solar or any subsidiary on or after the Effective Time will vest in full as of immediately prior to the Effective Time and be treated as a vested RSU.

 

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No executive officer holds Vivint Solar RSUs.

For the following directors, the estimated value of the RSUs that are currently vested or scheduled to vest before the assumed Effective Time (with the value of each RSU to be calculated based on $        ) is: Mr. D’Alessandro $         and Mr. Tibbetts $            .

Unvested Options and Restricted Stock Units

As described under “The Merger—Treatment of Vivint Solar Equity Awards,” subject to any written agreement between the relevant holder and Vivint Solar and/or SunEdison, as of the Effective Time, each option to acquire shares of Vivint Solar common stock that is outstanding and unexercised immediately prior to the Effective Time (other than a vested option) will be assumed by SunEdison in the Merger and converted into an option to purchase SunEdison common stock. All RSUs of Vivint Solar that are outstanding as of immediately prior to the Merger (but excluding any RSU of Vivint Solar (or portion thereof) that becomes vested as a result of the consummation of the Merger) will be assumed by SunEdison and converted into a RSU of SunEdison. With respect to any such equity awards so assumed by SunEdison, such equity awards will be assumed on terms substantially in effect prior to the assumption (but taking into account any changes thereto provided for in the applicable Vivint Solar stock plan, in any award agreement or in such equity awards by reason of the Merger Agreement or the Merger), except for adjustments to the underlying number of shares and, with respect to options, the exercise price based on an equity award exchange ratio reflected in the Merger Agreement.

Payments to Vivint Solar Executive Officers Contingent Upon or Following the Merger

The descriptions below are summaries of the material terms of the agreements that Vivint Solar has with its executive officers, including its named executive officers (“NEOs”), which are qualified in their entirety by the actual agreements, copies of which have been filed with the SEC.

Severance and Change of Control Benefits

Vivint Solar entered into involuntary termination protection agreements with certain key executives, including each of Vivint Solar’s executive officers.

Involuntary Termination Protection Agreements

Vivint Solar entered into involuntary termination protection agreements with Messrs. Butterfield, Russell, Allred, Dickson, Kinghorn and Lindquist. Subject to the effectiveness of the Amendments (as defined below), if applicable, under the involuntary termination protection agreements the severance benefits to which Vivint Solar’s executive officers are entitled are described below:

If the executive officer’s employment is terminated either by Vivint Solar without “cause” (other than by reason of death or “disability”) or, for Messrs. Butterfield, Russell, Allred, Dickson and Lindquist, by the executive officer for “good reason” (as such terms are defined in the executive officer’s agreement, or as applicable, amended or modified by the applicable Amendment), and in each case the termination occurs prior to the effective date of the termination of the involuntary termination protection agreements pursuant to the Amendment, if applicable, and outside of the period beginning six months prior to and ending 18 months following a “change of control” (as defined in in the involuntary termination protection agreements, and such period is referred to as the “Change of Control Period”), the executive officer will receive the following severance benefits:

 

    an amount equal to 1.0x, or 1.5x in the case of Mr. Butterfield and 0.5x in the case of Mr. Kinghorn, the sum of (1) the executive officer’s base salary rate as then in effect and (2) the average of performance bonuses paid to the executive for each year the executive was employed by Vivant Solar during the three-year period immediately preceding the date of the executive officer’s termination, which will be paid to the executive officer in equal installments over a period of 12 months, or 18 months in the case of Mr. Butterfield, and 6 months in the case of Mr. Kinghorn, following the date of termination;

 

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    an amount equal to the pro-rata portion of the annual bonus paid to the executive officer in respect of the fiscal year ending immediately prior to the fiscal year in which the executive officer’s employment is terminated, which will be paid to the executive officer in equal installments over a period of 12 months, or 18 months in the case of Mr. Butterfield, and 6 months in the case of Mr. Kinghorn, following the date of termination; and

 

    continuing payments to reimburse the executive officer for COBRA continuation coverage for a period of up to 12 months, or 18 months in the case of Mr. Butterfield, or 6 months in the case of Mr. Kinghorn, or, if such reimbursements would result in an excise tax, a lump sum payment of $24,000, or $36,000 in the case of Mr. Butterfield, and $12,000 in the case of Mr. Kinghorn, in lieu of such reimbursements.

In order to receive the severance benefits, the executive officer must sign and not revoke a release of claims in Vivint Solar’s favor and comply with certain restrictive covenants (as modified by the Amendment, to the extent applicable) relating to noncompetition, nonsolicitation, and nondisparagement for a period of 12 months, or 18 months in the case of Mr. Butterfield, and 6 months in the case of Mr. Kinghorn, following the date of termination.

If the executive officer’s employment is terminated either by Vivint Solar without “cause” (other than by reason of death or “disability”) or, if applicable, by the executive officer for good reason), and in each case the termination occurs prior to the effective date of the termination of the involuntary termination protection agreements pursuant to the Amendment, if applicable, and during the Change of Control Period, the executive officer will receive the following severance benefits:

 

    a lump sum payment of an amount equal to 2.0x, or 3.0x in the case of Mr. Butterfield, and 1.0x in the case of Mr. Kinghorn (or 1.5x with respect to all executive officers other than Messrs. Butterfield and Kinghorn, or 2.0x in the case of Mr. Butterfield or 1.0x in the case of Mr. Kinghorn, if the termination occurs after the third anniversary of the effective date of the Registration Statement on Form S-1 related to Vivint Solar’s initial public offering), the sum of (1) the executive officer’s base salary rate as then in effect and (2) (a) if the executive officer has been employed with Vivint Solar for at least one year as of the date of his termination of employment, the average of performance bonuses paid to the executive officer for each year the executive officer was employed by Vivint Solar during the three-year period immediately preceding the date of the executive officer’s termination, or (b) if the executive officer has been employed with Vivint Solar for less than one year as of the date of his termination, the executive officer’s target annual performance bonus in effect for the fiscal year in which the termination occurs;

 

    a lump sum payment equal to the pro-rata portion of the annual performance bonus that would have been paid to the executive officer had the executive been employed by Vivint Solar for the entire fiscal year in which the executive officer’s employment was terminated, based on actual performance for such fiscal year and assuming that any performance objectives that are based on individual performance are achieved at target levels;

 

    100% of the executive officer’s then-outstanding equity awards will immediately vest and become exercisable and, with respect to equity awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at target levels; and

 

    continuing payments to reimburse the executive officer for COBRA continuation coverage for a period of up to 18 months, or in the case of Mr. Kinghorn 12 months, or if such reimbursements would result in an excise tax, a lump sum payment of $36,000, or $24,000 in the case of Mr. Kinghorn, in lieu of such reimbursements.

In order to receive the change in control severance benefits, the executive officer must sign and not revoke a release of claims in Vivint Solar’s favor and comply with certain restrictive covenants (as modified by the Amendment, to the extent applicable) relating to noncompetition, nonsolicitation, and nondisparagement for a period of 12 months following the date of his termination.

 

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If any of the payments provided for under the involuntary termination protection agreement or otherwise payable to the executive officer would constitute “parachute payments” within the meaning of Section 280G of the Code and could be subject to the related excise tax under Section 4999 of the Code, the executive officer would be entitled to receive either full payment of benefits or such lesser amount which would result in no portion of the benefits being subject to the excise tax, whichever results in the greater amount of after-tax benefits to such executive officer. These agreements do not require Vivint Solar to provide any tax gross-up payments to any executive officer.

Employment Agreement with Mr. Plagemann

Subject to the effectiveness of the Amendment with Mr. Plagemann, pursuant to the employment agreement between Vivint Solar and Mr. Plagemann, if Mr. Plagemann’s employment is terminated by Vivint Solar prior to the effective date of the termination of the employment agreement pursuant to the Amendment and without “cause” (other than as a result of death or “disability”) or by Mr. Plagemann for “good reason” (as such terms are defined in Mr. Plagemann’s employment agreement and as modified by the Amendment), Mr. Plagemann will receive a lump sum cash payment equal to the sum of (1) 100% of Mr. Plagemann’s most recent base salary, (2) $750,000 and (3) a cash payment equal to the costs of providing COBRA continuation coverage for Mr. Plagemann and his dependents for one year. In order to receive the severance benefits under his employment agreement, Mr. Plagemann must sign and not revoke a release of claims in Vivint Solar’s favor and comply with the restrictive covenants (as modified by the Amendment, to the extent applicable) in his employment agreement.

Amendments to Involuntary Termination Protection Agreements and Employment Agreement

Vivint Solar entered into letter agreement amendments on July 19, 2015 with each of Messrs. Butterfield, Russell, Allred, Dickson and Kinghorn to amend each of their involuntary termination protection agreements and Vivint Solar entered into a letter agreement amendment with Mr. Plagemann to amend his employment agreement (each, an “Amendment”). Under the terms of the applicable Amendment, upon the Effective Time, the involuntary termination protection agreements with Messrs. Butterfield, Russell, Allred, Dickson and Kinghorn and the employment agreement with Mr. Plagemann will be amended to provide that such agreements will be terminated and have no further effect upon the second anniversary of the Effective Time; provided that the restrictive covenants under the involuntary termination protection agreements and the employment agreement with Mr. Plagemann will continue in full force and effect during Messrs. Butterfield’s, Russell’s, Allred’s, Dickson’s, Kinghorn’s and Plagemann’s employment or service with Vivint Solar or any affiliate and for the one-year period thereafter. Pursuant to the terms of the applicable Amendment, if applicable, each of the executive officers agreed that the consummation of the Merger alone will not constitute a material diminution in their title, duties, authority, reporting position or responsibilities measured in the aggregate for purposes of the “good reason” definition in the applicable involuntary termination protection agreement or employment agreement. In addition, Mr. Russell’s Amendment amended the definition of “good reason” in his involuntary termination protection agreement which definition will apply following the Effective Time under the involuntary termination protection agreement. Pursuant to the terms of the applicable Amendment, if applicable, the executive officer also agreed that the restrictive covenants in the executive officer’s involuntary termination protection agreement shall apply for a period of one-year following the executive officer’s termination of employment and shall apply (in addition to the practices described therein) to all solar development.

Pursuant to the applicable Amendment, after the Effective Time, the following executive officers will be granted an award of RSUs in respect of SunEdison common stock in the following amounts: 700,000 RSUs to Mr. Butterfield, 225,000 RSUs to Messrs. Russell, Allred and Dickson, 125,000 RSUs to Mr. Kinghorn and 75,000 RSUs to Mr. Plagemann. The RSU award grants will vest as follows: ten percent (10%) on December 31, 2017, forty-five percent (45%) on December 31, 2018, and the remaining forty-five percent (45%) on December 31, 2019. Subject to the compensation committee’s discretion to accelerate vesting, all unvested RSUs will be immediately forfeited upon a termination of employment for any reason.

 

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As described above, the applicable Amendment provides that thirty percent (30%) of Mr. Butterfield’s currently held options to purchase shares of Vivint Solar common stock and twenty percent (20%) of Messrs. Russell’s, Allred’s, Dickson’s, Kinghorn’s and Plagemann’s currently held options to purchase shares of Vivint Solar common stock, whether vested or unvested, will be converted into an unvested option to purchase shares SunEdison common stock. These options to purchase shares of SunEdison common stock will vest fifty percent (50%) on each of the first and second anniversaries of the Effective Time; provided that one hundred percent (100%) will vest upon Messrs. Butterfield’s, Russell’s, Allred’s, Dickson’s, Kinghorn’s and Plagemann’s termination of employment by Vivint Solar for any reason other than “cause” or, if applicable, by the executives for “good reason” (as defined in the applicable Amendment).

Transaction and Retention Bonus Plan

In connection with the transaction, Vivint Solar’s board of directors approved a transaction and retention bonus plan to pay an aggregate of $10,000,000 in transaction and retention bonuses to employees of Vivint Solar. The allocation of these bonuses was determined by Vivint Solar’s board of directors in consultation with Mr. Butterfield (other than with respect to the amount allocated to Mr. Butterfield), and included allocations to the following executive officers of Vivint Solar: Chance Allred ($1,200,000), Greg Butterfield ($1,200,000), Paul Dickson ($1,200,000), Dwain Kinghorn ($350,000), Shawn Lindquist ($300,000), Thomas Plagemann ($320,000) and Dana Russell ($1,200,000).

Indemnification and Insurance

Pursuant to the Merger Agreement, SunEdison has agreed to, and to cause the surviving corporation to, indemnify and hold harmless each director and officer of Vivint Solar or any of its subsidiaries who were directors or officers on the date of the Merger Agreement or who become directors or officers following the date of the Merger Agreement and prior to the Effective Time (in each case for acts or failures to act in such capacity) against any costs or expenses (including reasonable attorneys’ fees, costs and expenses), judgments, fines, losses, claims, amounts paid in settlement, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or relating to matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time (including any matters arising in connection with the transactions contemplated by the Merger Agreement), to the fullest extent permitted by applicable law (and the surviving corporation shall also advance expenses (including reasonable attorneys’ fees, costs and expenses) to such persons as incurred to the fullest extent permitted under applicable law).

For six years from and after the Effective Time, the surviving corporation shall maintain in effect the directors’ and officers’ liability (and fiduciary) insurance policies currently maintained by Vivint Solar covering acts or omissions occurring on or prior to the Effective Time with respect to those persons who are currently covered by Vivint Solar’s respective directors’ and officers’ liability (and fiduciary) insurance policies on terms with respect to such coverage and in amounts no less favorable to the indemnified parties described in the preceding paragraph than those set forth in the relevant policy in effect on the date of the Merger Agreement; provided that the annual cost thereof shall not exceed 350% of the annual cost of such policies as of the date of the Merger Agreement. If such insurance coverage cannot be maintained for such cost, SunEdison shall maintain the most advantageous policies of directors’ and officers’ insurance otherwise obtainable for such cost. Prior to the Effective Time, Vivint Solar may purchase a six-year “tail” prepaid policy on terms and conditions no less favorable to the indemnified parties than the existing directors’ and officers’ liability (and fiduciary) insurance maintained by Vivint Solar, covering without limitation the transactions contemplated hereby; provided that the aggregate cost thereof shall not exceed 350% of the annual cost of the directors’ and officers’ liability (and fiduciary) insurance maintained by Vivint Solar as of the date of the Merger Agreement. If such “tail” prepaid policy has been obtained by Vivint Solar prior to the Effective Time, it will satisfy the obligations set forth in this paragraph.

 

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In addition, all rights to indemnification, advancement of expenses and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time now existing as of the date of the Merger Agreement in favor of the current or former directors and officers, and the fiduciaries currently indemnified under benefit plans of Vivint Solar and its subsidiaries, as provided in their respective certificates or articles of incorporation, by-laws (or comparable organizational documents) or other agreements providing indemnification, advancement or exculpation, will survive the Merger and continue in full force and effect in accordance with their terms. SunEdison will cause the surviving corporation to honor all such rights, and for six years from and after the Effective Time, no such provision in any certificate or articles of incorporation, by-laws (or comparable organizational document) or other agreement shall be amended, modified or repealed in any manner that would adversely affect the rights or protections thereunder to any such individual with respect to acts or omissions occurring at or prior to the Effective Time.

Treatment of Vivint Solar Equity Awards

As a result of the Merger, the treatment of Vivint Solar’s equity awards will be as follows:

Vested Options

Subject to any written agreement between the relevant holder and Vivint Solar and/or SunEdison (including as to certain options held by certain members of Vivint Solar’s management team that will be subject to additional vesting, as described herein), at the Effective Time, each option to acquire shares of Vivint Solar common stock that is outstanding, vested and unexercised as of immediately prior to the Effective Time or that vests as a result of the occurrence of the Effective Time will, without any action on the part of SunEdison, Merger Sub, Vivint Solar or the holder thereof, other than Vivint Solar delivering any notices required pursuant to the terms of the applicable Vivint Solar equity plan, be converted into and become a right to receive the Option Payment consisting of an amount in cash (without interest), less any required tax withholding, equal to the product of: (i) the aggregate number of shares of Vivint Solar common stock subject to such option immediately prior to the Effective Time and (ii) an amount equal to the excess, if any, of (1) the Public Cash Consideration less (2) the exercise price per share of such option.

Vested RSUs

Subject to any written agreement between the relevant holder and Vivint Solar and/or SunEdison, each outstanding RSU (or portion thereof) to be settled in shares of Vivint Solar common stock that becomes vested as a result of the consummation of the Merger will be treated as a share of Vivint Solar common stock and be converted into the right to receive the Merger Consideration.

Unvested Options and RSUs

Subject to any written agreement between the relevant holder and Vivint Solar and/or SunEdison, each option to acquire shares of Vivint Solar common stock that is outstanding and unexercised immediately prior to the Effective Time (other than a vested option) will be assumed by SunEdison in the Merger and converted into an option to purchase SunEdison common stock, and each RSU of Vivint Solar that is outstanding as of immediately prior to the Merger (but excluding any RSU of Vivint Solar (or portion thereof) that becomes vested as a result of the consummation of the Merger) will be assumed by SunEdison and converted into a RSU of SunEdison. With respect to any such equity awards so assumed by SunEdison, such equity awards will be assumed on terms substantially in effect prior to the assumption (but taking into account any changes thereto provided for in the applicable Vivint Solar stock plan, in any award agreement or in such equity awards by reason of the Merger Agreement or the Merger), except for adjustments to the underlying number of shares and, with respect to options, the exercise price based on an equity award exchange ratio reflected in the Merger Agreement.

 

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Each then outstanding and unvested option or RSU immediately prior to the Effective Time that is held by a non-employee director or person who shall not continue to provide services to Vivint Solar or any subsidiary on or after the Effective Time will vest in full as of immediately prior to the Effective Time and be treated as a vested option or a RSU.

Each option to acquire shares of Vivint Solar common stock (i) which is an “incentive stock option” (as defined in Section 422 of the Code) shall be adjusted in accordance with the requirements of Section 424 of the Code and (ii) shall be adjusted in a manner which complies with Section 409A of the Code.

Promptly following the Effective Time, but in no event more than ten business days after the Closing Date, SunEdison shall issue to each holder of an option to acquire shares of Vivint Solar common stock or RSU to be settled in shares of Vivint Solar common stock that is converted into an option to acquires shares of SunEdison common stock or a RSU to be settled in shares of SunEdison common stock a document evidencing the foregoing assumption of such option or RSU of Vivint Solar by SunEdison.

LTIP Awards

Each LTIP Award issued under an LTIP Plan (as defined in the Merger Agreement) that is outstanding immediately prior to the Effective Time will, without any action on the part of SunEdison or Vivint Solar, become fully vested as a result of the Merger and converted into the right to receive a payment calculated in accordance with the applicable LTIP Plan, and payable in accordance with the terms thereof.

For more information, see the section entitled “The Merger Agreement—The Merger Consideration— Vivint Solar Stock Options and Other Stock Awards” beginning on page 135.

SunEdison Compensation Plans and Certain Equity Awards

As further described in Note 13 to SunEdison’s Unaudited Condensed Consolidated Financial Statements for the nine months ended September 30, 2015, contained in SunEdison’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2015, which is incorporated by reference herein, SunEdison shareholders approved (i) the 2015 Long-Term Incentive Plan (the “2015 LTIP”) applicable to consultants and employees effective as of June 29, 2015 and terminated its authority to grant new awards under the Amended and Restated SunEdison, Inc. 2010 Equity Incentive Plan (the “2010 Plan”), (ii) the SunEdison, Inc. 2015 Non-Employee Director Incentive Plan (the “Director-LTIP”), replacing the 2010 Plan, applicable to non-employee directors effective as of June 29, 2015 and (iii) the 2015 SunEdison Inc. Employee Stock Purchase Plan (the “ESPP”) effective as of February 4, 2015. As further described above under the caption “—Treatment of Vivint Solar Equity Awards,” the Merger Agreement provides for new equity awards under such plans in exchange for certain Vivint Solar equity awards. For further information, please see the 2015 LTIP, the Director LTIP and the ESPP, which are incorporated by reference into the Quarterly Report on Form 10-Q for the six months ended June 30, 2015.

Board of Directors and Management of SunEdison After the Merger

The board of directors of SunEdison is not expected to change in connection with the Merger. Upon consummation of the Merger, Mr. Butterfield is expected to become an executive officer of SunEdison. As of the date of this filling, Mr. Butterfield’s title at SunEdison has not been determined. The remainder of the executive officers are not expected to change in connection with the Merger.

Exchange of Shares

Citibank, N.A. will serve as depository agent and Continental Stock Transfer and Trust Company will serve as paying agent (Citibank, N.A., in collaboration with Continental Stock Transfer and Trust Company in such

 

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capacities, referred to herein as the “Exchange Agent”) to exchange shares of Vivint Solar common stock for shares of SunEdison common stock. At the Effective Time, shares of Vivint Solar common stock will be converted into the right to receive the Merger Consideration. All shares of Vivint Solar common stock will be cancelled and will cease to exist when so converted and holders of Vivint Solar common stock will cease to have any rights as stockholders of Vivint Solar other than the right to receive the Merger Consideration. Holders of Vivint Solar common stock will not receive payment of any dividends or distributions with a record date after the Effective Time with respect to any shares of SunEdison common stock received as Merger Consideration until such shares of Vivint Solar common stock have been surrendered to the Exchange Agent for exchange.

Promptly after the Effective Time, SunEdison will cause the Exchange Agent to mail to each holder of record (as of immediately prior to the Effective Time) of Vivint Solar common stock that was converted into the right to receive the Merger Consideration a letter of transmittal and instructions for surrendering its shares of Vivint Solar common stock to the Exchange Agent for the Merger Consideration. For more information, see the section entitled “The Merger Agreement—The Merger Consideration—Exchange Procedures.”

Litigation Related to the Merger

On July 31, 2015, a putative class action lawsuit captioned Canez v. Butterfield, et al., C.A. No. 11359-VCL was filed in the Delaware Court of Chancery. The complaint names as defendants the members Vivint Solar’s board of directors and alleges that they breached their fiduciary duties owed to Vivint Solar’s stockholders by approving the Merger Agreement at an inadequate price and via an unfair and flawed process. The complaint also names as defendants SunEdison, Merger Sub and TerraForm Power, and alleges that these corporate entities aided and abetted the alleged fiduciary breaches by Vivint Solar’s board of directors. The complaint seeks a declaration that the Merger Agreement is unenforceable, an injunction against the Merger, rescission of the Merger to the extent already implemented, imposition of a constructive trust in favor of the plaintiffs and putative class members upon any benefits improperly received by the defendants as a result of their wrongful conduct and other relief as may deemed appropriate by the court. The lawsuit is in a preliminary stage. SunEdison believes this lawsuit is without merit and intends to vigorously defend against the allegations.

On August 7, 2015, a putative class action lawsuit captioned Belyea v. Vivint Solar, Inc., et al., Case No. 11376-VCL was filed in the Delaware Court of Chancery. The complaint names as defendants the members of Vivint Solar’s board of directors and 313, as the controlling stockholder of Vivint Solar, and alleges that they breached their fiduciary duties owed to Vivint Solar’s other stockholders by approving the Merger Agreement at an inadequate price and via a flawed process marred by conflicts of interest. The complaint also names as defendants SunEdison and Merger Sub, and alleges that these corporate entities aided and abetted the alleged fiduciary breaches by Vivint Solar’s board of directors and 313. The complaint seeks to enjoin the Merger or, in the event the Merger is consummated, damages. The lawsuit is in a preliminary stage. SunEdison believes this lawsuit is without merit and intends to vigorously defend against the allegations.

On August 21, 2015, a putative class action lawsuit captioned Bushansky v. Vivint Solar, Inc., et al., Docket No. 150401294 was filed in the District Court of the State of Utah, Fourth Judicial District, Utah County, Provo. The complaint names as defendants Vivint Solar, SunEdison, Merger Sub, TerraForm Power and the directors of Vivint Solar and alleges (i) that the directors breached their fiduciary duties in connection with the Merger, on the grounds that the directors capped the price of Vivint Solar at a price that does not adequately reflect Vivint Solar’s true value and that the directors failed to sufficiently inform themselves of Vivint Solar’s true value or disregarded such value and (ii) that SunEdison and TerraForm Power aided and abetted such breaches, on the grounds that SunEdison and TerraForm Power had unfair advantages because they obtained sensitive non-public information about Vivint Solar in connection with discussions regarding the Merger and that the Merger Consideration is unfair and inadequate. The complaint seeks (a) a declaration that the action may be maintained as a class action and certifying the plaintiff as class representative and plaintiff’s counsel as class counsel, (b) to preliminarily and permanently enjoin the Merger, (c) in the event the Merger is consummated, rescission and setting aside of the Merger or rescissory damages, (d) damages, (e) costs, including plaintiff’s attorneys’ and

 

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experts’ fees and (f) other relief as determined by the court. On August 24, 2015, the case was transferred to the Spanish Fork Department of the Fourth District Court with the Docket No. 150300127. The lawsuit is in a preliminary stage. SunEdison believes this lawsuit is without merit and intends to vigorously defend against the allegations.

On August 25, 2015, a putative class action lawsuit captioned Williams v. Vivint Solar, Inc., et al., Docket No. 150401309 was filed in the District Court of the State of Utah, Fourth Judicial District, Utah County, Provo. The complaint names as defendants Vivint Solar, SunEdison, Merger Sub, TerraForm Power and the directors of Vivint Solar and alleges (i) that the directors breached their fiduciary duties s in connection with the Merger, on the grounds that the directors initiated a process to sell Vivint Solar that undervalues Vivint Solar, capped the price of Vivint Solar at a price that does not adequately reflect Vivint Solar’s true value and failed to sufficiently inform themselves of Vivint Solar’s true value or disregarded such value and (ii) that Vivint Solar, SunEdison and TerraForm Power aided and abetted such breaches, on the grounds that Vivint Solar provided, and SunEdison and TerraForm Power obtained, sensitive non-public information about Vivint Solar and thus had unfair advantages enabling them to pursue the Merger, and that the Merger Consideration is unfair and inadequate. The complaint seeks (a) a declaration that the action may be maintained as a class action and certifying the plaintiff as class representative and plaintiff’s counsel as class counsel, (b) to preliminarily and permanently enjoin the Merger, (c) in the event the Merger is consummated, rescission and setting aside of the Merger or rescissory damages, (d) damages, (e) costs, including plaintiff’s attorneys’ and experts’ fees and (f) other relief as determined by the court. The lawsuit is in a preliminary stage. SunEdison believes this lawsuit is without merit and intends to vigorously defend against the allegations.

Other Litigation

SunEdison and Vivint Solar are involved in various legal proceedings, claims, investigations and other legal matters which arise in the ordinary course of business, including the matters described below and other legal proceedings disclosed in SunEdison’s and Vivint Solar’s filings with the SEC that are incorporated herein by reference.

Class Action Regarding TerraForm Global IPO

On October 23, 2015, October 30, 2015, December 3, 2015 and December 9, 2015, separate purported class action lawsuits were filed in the Superior Court of the State of California for the County of San Mateo (the “Superior Court”) against SunEdison, TerraForm Global, certain officers and directors of TerraForm Global and SunEdison and each of the underwriters of the August 5, 2015 Global IPO. Additionally, on October 29, 2015 and November 5, 2015, separate purported class action lawsuits were filed in in the U.S. District Court for Northern District of California (together with the Superior Court, the “Court”) against the same defendants. The class action plaintiffs in each of the lawsuits assert claims under Section 11, Section 12(a)(2) and Section 15 of the Securities Act. The class action complaints in each of the lawsuits allege, among other things, that the defendants made false and materially misleading statements and failed to disclose material information in the Registration Statement for the Global IPO regarding SunEdison and its recent operating results and business strategy. Among other relief, the class action complaints seek class certification, unspecified compensatory damages, rescission, attorneys’ fees, costs and such other relief as the Court should deem just and proper.

SunEdison and TerraForm Global intend to defend the class action lawsuits vigorously. SunEdison is still in the preliminary stages of reviewing the allegations made in the complaints and, as a result, is unable to provide any assurances as to the ultimate outcome of such lawsuits or that an adverse resolution of these lawsuits would not have a material adverse effect on SunEdison’s consolidated financial position and results of operations.

 

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Other Securities Litigation

On November 30, 2015 and December 9, 2015, separate purported class action lawsuits were filed in the U.S. District Court for the Eastern District of Missouri, Eastern Division (the “District Court”) against SunEdison and certain executive officers of SunEdison on behalf of purchasers of publicly traded common stock of SunEdison between June 16, 2015 and October 6, 2015 (the “class period”). The class action plaintiffs in each of these lawsuits assert claims under Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder and against the executives for control person liability under Section 20(a) of the Exchange Act. The class action complaints in each of the lawsuits allege, among other things, that the defendants made false and materially misleading statements and failed to disclose material information to investors during the class period regarding SunEdison’s operations, business and financial results and outlook. Among other relief, the class action complaints seek class certification, unspecified compensatory damages, attorneys’ fees, costs and such other relief as the District Court should deem appropriate.

SunEdison intends to defend the class action lawsuits vigorously. SunEdison is still in the preliminary stages of reviewing the allegations made in the complaints and, as a result, is unable to provide any assurances as to the ultimate outcome of such lawsuits or that an adverse resolution of these lawsuits would not have a material adverse effect on SunEdison’s consolidated financial position and results of operations.

 

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THE MERGER AGREEMENT

This section of the proxy statement describes material aspects of the Merger Agreement. This summary may not contain all of the information that is important to you. You should carefully read this entire proxy statement, including the full text of the Merger Agreement and the Merger Agreement Amendment, which are attached as Annex A and Annex B and incorporated by reference herein, and the other documents to which SunEdison and Vivint Solar refer for a more complete understanding of the Merger. In addition, important business and financial information about SunEdison and Vivint Solar is incorporated into this proxy statement by reference. You may obtain the information incorporated by reference into this proxy statement without charge by following the instructions in the section entitled “Additional Information” beginning on page 199.

Structure of the Merger

Under the terms of the Merger Agreement, Merger Sub, a wholly owned subsidiary of SunEdison, will merge with and into Vivint Solar, with Vivint Solar surviving as a wholly owned subsidiary of SunEdison.

Closing and Effective Time of the Merger

The Closing Date will occur on the second business day following the satisfaction or waiver of all of the closing conditions provided in the Merger Agreement, except for those conditions that, by their terms, are to be satisfied at the Closing Date (but subject to the satisfaction or waiver (to the extent permitted by applicable law) of those conditions at such time), or, (a) if the ten- day marketing period described in the Merger Agreement has not ended on such date, the Closing Date shall take place on the earlier to occur of (i) any business day during the marketing period to be specified by SunEdison to Vivint Solar on no less than three business days’ written notice to Vivint Solar and (ii) the business day following the last day of the marketing period, but in each case subject to the satisfaction or, to the extent permitted by applicable law, waiver of the conditions precedent and (b) in no event shall SunEdison or Merger Sub be required to complete the Merger and consummate the transactions contemplated by the Merger Agreement prior to January 29, 2016. The Effective Time will occur effective upon the filing of the certificate of merger with the State of Delaware or at such later time as is agreed to by the parties hereto and specified in the certificate of merger.

Post-Merger Governing Documents, Directors and Officers, Corporate Name and Headquarters

SunEdison Governing Documents

The Merger Agreement provides that SunEdison shall not amend or propose to amend the Amended and Restated Certificate of Incorporation of SunEdison (the “SunEdison Charter”) or the Amended and Restated Bylaws of SunEdison (the “SunEdison Bylaws”) prior to the Effective Time.

Vivint Solar Governing Documents

At the Effective Time, the amended and restated certificate of incorporation of Vivint Solar (the “Vivint Solar Charter”) and the amended and restated bylaws of Vivint Solar (the “Vivint Solar Bylaws”), as in effect immediately prior to the Effective Time, shall be amended and restated as of the Effective Time to be in the form of the certificate of incorporation and bylaws of Merger Sub as in effect immediately prior to the Effective Time (except that the name of the surviving corporation shall remain “Vivint Solar, Inc.” and the provisions of the certificate of incorporation of Merger Sub regarding the incorporator of Merger Sub shall be omitted) and as amended shall be the certificate of incorporation and bylaws of surviving corporation until thereafter amended as provided therein or by applicable law.

Vivint Solar Board of Directors and Officers

The directors of Merger Sub immediately prior to the Effective Time shall, from and after the Effective Time, be the directors of the surviving corporation until their successors have been duly elected or appointed and qualified, or their earlier death, resignation or removal. The officers of Vivint Solar immediately prior to the

 

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Effective Time shall, from and after the Effective Time, be the initial officers of the surviving corporation until their successors have been duly elected or appointed and qualified, or their earlier death, resignation or removal.

The Merger Consideration

Conversion of Vivint Solar Common Stock

Pursuant to the terms of the Merger Agreement and the notice delivered by Vivint Solar to SunEdison on December 13, 2015 (the “Notice”), pursuant to which Notice Vivint Solar exercised its option to elect that the holders of the Vivint Solar common stock other than our controlling stockholder 313 Acquisition LLC (the “Public Stockholders”) receive merger consideration consisting of all cash, with 313 Acquisition LLC receiving a reduced amount of cash and all of the common stock and convertible notes otherwise issuable as merger consideration, Vivint Solar stockholders will receive at the effective time of the Merger (the “Effective Time”), the following:

(a) each share of Vivint Solar common stock issued and outstanding immediately prior thereto held by the Public Stockholders (such shares, excluding shares directly owned by Vivint Solar, SunEdison or Merger Sub, or any of Vivint Solar’s or SunEdison’s respective wholly-owned subsidiaries, or shares with respect to which appraisal rights are properly exercised under Delaware law, the “Public Shares”) will be converted into and will thereafter represent the right to receive:

(i) cash in the amount of $7.89 (the “Base Cash Consideration”);

(ii) an additional amount of cash consideration representing the fair market value of $3.30 in principal amount of 4-year convertible notes (the “Convertible Notes”) issued by SunEdison pursuant to an indenture to be entered into concurrently with the consummation of the Merger and convertible into SunEdison common stock (such principal amount of Convertible Notes, the “Note Consideration”);

(iii) an additional amount in cash consideration (which will equal $0.75) representing the fair market value of a number of shares of SunEdison common stock equal to the quotient determined by dividing $3.31 by the Signing Measurement Price (as defined below), and rounding the result to the nearest 1/100,000 of a share (such number of shares of SunEdison common stock, the “Signing Stock Consideration”); and

(iv) an additional amount in cash consideration representing the fair market value of a number of shares of SunEdison common stock equal to the quotient determined by dividing $0.75 by the Closing FMV (as defined below) and rounding the result to the nearest 1/100,000 of a share (such number of shares of SunEdison common stock, the “Additional Stock Consideration” and, together with the Signing Stock Consideration, the “Stock Consideration”);

the total amounts payable to each Public Share representing the fair market value of the Signing Stock Consideration (the fair market value of which is based on the “Closing FMV” of such Signing Stock Consideration, as described below), the Additional Stock Consideration (the fair market value of which will equal $0.75) and the Note Consideration (the fair market value of which will be determined based on the formula described below) being referred to herein as the “Additional Cash Consideration” and together with the Base Cash Consideration payable in respect of the Public Shares, the “Public Cash Consideration”; and

(b) each share of Vivint Solar common stock that is owned by 313 Acquisition LLC (“313”) (such shares, the “313 Shares,” and together with the Public Shares, the “Participating Shares”) will be converted into and will thereafter represent the right to receive:

(i) the Base Cash Consideration less an amount in cash equal to the aggregate Additional Cash Consideration divided by the number of outstanding 313 Shares;

(ii) the Note Consideration multiplied by the total number of Participating Shares, allocated equally among such 313 Shares; and

(iii) the Stock Consideration multiplied by the total number of Participating Shares, allocated equally among such 313 Shares;

 

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A copy of the Notice was filed by Vivint Solar with the SEC on Form 8-K. Accordingly, the “Merger Consideration” (as such term is used in this proxy statement) shall mean the Public Cash Consideration and the 313 Merger Consideration collectively.

As used herein, the “Signing Measurement Price” represents the volume weighted average price per share of SunEdison common stock (rounded down to the nearest cent) on the New York Stock Exchange (the “NYSE”) for the 30 consecutive trading days ending on (and including) the third trading day immediately prior to the Effective Time; provided that the calculation is subject to a “collar” which provides that if the Signing Measurement Price is less than $27.51, the Signing Stock Consideration will be equal to 0.120 shares of SunEdison common stock, and if the Signing Measurement Price is more than $33.62, the Signing Stock Consideration will be 0.098 shares of SunEdison common stock. Based on the trading price of SunEdison’s common stock as of December 18, 2015, and the collar, the Signing Stock Consideration is equal to 0.120 shares of SunEdison common stock.

As used in this proxy statement, the “Closing FMV” represents the volume weighted average price per share of SunEdison common stock (rounded down to the nearest cent) on the NYSE for the five (5) consecutive trading days ending on (and including) the second trading day immediately prior to the Effective Time.

As determined in accordance with the Notice, the fair market value of the per share Merger Consideration to be paid in exchange for the Public Shares is equal to an amount in cash that is equal to the sum of the following:

(i) The Base Cash Consideration, which is valued at $7.89.

(ii) The fair market value of the Note Consideration. Pursuant to the Merger Agreement, the principal amount of Convertible Notes constituting the Note Consideration per share is equal to $3.30. Pursuant to the Notice, the fair market value of the principal amount of the aggregate Note Consideration payable to the holders of all Participating Shares will be determined by calculating the net present value (giving effect to all leap years) of cash amounts payable to holders of such Convertible Notes over time pursuant to the indenture governing the Convertible Notes, discounted by the average internal rate of return of each series of convertible notes of SunEdison outstanding as of December 13, 2015 (collectively, the “Reference Convertible Notes”). The internal rate of return for each series of the Reference Convertible Notes will be calculated based on the volume weighted average price of each series of Reference Convertible Notes (rounded down to the nearest cent) as reported by Bloomberg Financial Markets for the five consecutive trading days ending on (and including) the second trading day immediately prior to the Effective Time. The fair market value of the principal amount of the aggregate Note Consideration payable to the holders of all Participating Shares divided by the principal amount of such aggregate Note Consideration will result in a percentage (the “Note Percentage”) that establishes the fair market value of the Note Consideration relative to the principal amount of Convertible Notes that constitutes the Note Consideration. As such, the fair market value of the Note Consideration shall equal $3.30 multiplied by the Note Percentage.

(iii) The fair market value of the Signing Stock Consideration. Pursuant to the Merger Agreement, the number of shares of SunEdison common stock constituting Signing Stock Consideration will be determined based on the Signing Measurement Price; subject to the collar. Based on the trading price of the SunEdison common stock as of December 18, 2015, and the collar, the Signing Stock Consideration would be 0.120 shares of SunEdison common stock. Pursuant to the Notice, the fair market value of such SunEdison common stock will be equal to the product of the number of shares of SunEdison common stock to be paid as Signing Stock Consideration multiplied by the Closing FMV.

(iv) The fair market value of the Additional Stock Consideration. Pursuant to the Merger Agreement, the number of shares of SunEdison common stock constituting Additional Stock Consideration will be determined as the number of shares that, based on the Closing FMV, have a value equal to $0.75. Because the Notice provides that the fair market value of the Additional Stock Consideration is to be based on the Closing FMV, the fair market value of the Additional Stock Consideration will equal $0.75.

 

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Pursuant to the Notice, the amount of Additional Cash Consideration payable per share of Vivint Solar common stock is equal to the sum of the cash amounts as determined in clauses (ii), (iii) and (iv) above.

the total amounts payable to each 313 Share pursuant to clauses (b)(i) through (iii) being referred to herein as the “313 Merger Consideration”.

The fair market value of the per share Merger Consideration payable in exchange for the 313 Shares is equal to the fair market value of the aggregate 313 Merger Consideration divided by the number of outstanding 313 Shares. The fair market value of the aggregate amount payable to 313 is equal to the sum of:

(i) Aggregate Cash. The total Cash Consideration payable to 313 less the aggregate Additional Cash Consideration payable in respect of all the Public Shares.

(ii) Aggregate Note Consideration. Pursuant to the Merger Agreement, 313 will receive a principal amount of Convertible Notes equal to $3.30 multiplied by the total number of Participating Shares. The fair market value of such aggregate consideration will be equal to the principal amount of the Convertible Notes payable to all Participating Shares multiplied by the Note Percentage.

(iii) Aggregate Stock Consideration. Pursuant to the Merger Agreement, 313 will receive a number of shares of SunEdison common stock equal to the Stock Consideration multiplied by the total number of Participating Shares. The fair market value of such aggregate consideration will be equal to the total number of shares of SunEdison common stock payable to 313 multiplied by the Closing FMV;

In the event the number of shares of SunEdison common stock that would otherwise constitute the Stock Consideration would require SunEdison to seek approval from its stockholders pursuant to the rules and regulations of the NYSE or other securities laws, rules and regulations, the reference to $0.75 within the definition of Additional Stock Consideration will be reduced such that the total amount of the Stock Consideration would equal the maximum number of shares of SunEdison common stock that could be issued without such stockholder approval being required (the amount by which such reference to $0.75 is so reduced, the “Reduction”), and the amount of Cash Consideration will be increased by the amount of such Reduction. See the section entitled “The Merger Agreement—The Merger Consideration” beginning on page 131 of the accompanying proxy statement.

Based on the five day volume weighted average trading price of $5.85 of SunEdison common stock on the NYSE for the five consecutive trading days ended on December 18, 2015, the fair market value of the Signing Stock Consideration would be $0.70 and the fair market value of the Additional Stock Consideration would be $0.75, in each case per share of Vivint Solar common stock. As of the close of business on such date, the fair market value of the Stock Consideration and the Note Consideration would be $1.77 based on the formula described above. Accordingly, the total value of the Merger Consideration would have represented approximately $11.11 per share of Vivint Solar common stock as of such date. However, the value of the Merger Consideration will fluctuate with the market price of SunEdison common stock and will not be known at the time the Vivint Solar stockholders vote on the Merger at the Special Meeting of Stockholders. SunEdison common stock is listed on the NYSE under the trading symbol “SUNE,” and we encourage you to obtain quotes for the SunEdison common stock.

The Convertible Notes will be issued pursuant to an indenture to be entered into concurrently with the consummation of the Merger by and between SunEdison and Computershare Trust Company, National Association, as trustee (the “Trustee”), in the form attached as Annex I hereto (the “Indenture”). The Convertible Notes will constitute direct unsecured, senior obligations of SunEdison. The initial conversion price for the Convertible Notes will be 140% of the Signing Measurement Price, but the Signing Measurement Price for purposes of this calculation may not exceed $33.62 or be lower than $27.51. The Convertible Notes will bear interest at a rate of 2.25% per year, payable semiannually in arrears in cash. The Convertible Notes will have a maturity date that is four years from issuance. The Convertible Notes will be issuable only in registered form without coupons and in minimum denominations of $100 and any integral multiple of $100. Holders of the Convertible Notes may surrender the Convertible Notes for conversion only under limited circumstances, as described in the Indenture. Upon conversion

 

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SunEdison will deliver, at its election, (i) solely cash, (ii) solely shares of SunEdison common stock, or (iii) a combination of cash and shares of SunEdison common stock, with each of clauses (i), (ii) and (iii) to be based on a daily conversion value calculated on a proportionate basis for each trading day of a 25-day observation period. The conversion rate will be subject to adjustment in certain circumstances, as described in the Indenture.

SunEdison will not issue any fractional shares of SunEdison common stock or Convertible Notes with a denomination of less than $100 in the Merger. Holders of Vivint Solar common stock who would otherwise be entitled to a fractional share of SunEdison common stock or Convertible Notes with a denomination of less than $100 will receive cash in lieu thereof.

Pursuant to the Merger Agreement, all outstanding equity securities of Vivint Solar at the time of the Merger will be cancelled. The shares of SunEdison common stock to be issued in connection with the Merger will be newly issued shares. Consequently, neither the trading price of Vivint Solar common stock nor the trading price of SunEdison common stock reflects the price at which SunEdison common stock will trade following the Merger.

Assuming the Merger had been consummated on December 18, 2015, the last trading day prior to the date of this proxy statement, it is expected that the aggregate number of shares of SunEdison common stock issuable in the Merger to 313 (not including any such shares underlying the Convertible Notes) would have represented approximately 7.7% of the outstanding equity ownership of SunEdison (based on the total outstanding shares of SunEdison common stock as of November 2, 2015).

Each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time will be converted into and become one validly issued, fully paid and non-assessable share of common stock, par value $0.01 per share, of the surviving corporation and shall constitute the only outstanding shares of capital stock of the surviving corporation.

Exchange Procedures

Promptly after the Effective Time, SunEdison will cause the Exchange Agent to mail to each holder of record (as of immediately prior to the Effective Time) of Vivint Solar common stock that was converted into the right to receive the Merger Consideration a letter of transmittal and instructions for surrendering its shares of Vivint Solar common stock to the Exchange Agent for the Merger Consideration. Upon the proper surrender of the holder’s shares of Vivint Solar common stock, the stockholder will be entitled to receive in exchange for the stockholder’s shares:

 

    the Merger Consideration that the holder is entitled to receive pursuant to the Merger Agreement, as described under the heading “—Conversion of Vivint Solar Common Stock” above, including any cash in lieu of fractional shares or Convertible Notes in denominations of less than $100; and

 

    any cash in respect of any dividends that the holder has the right to receive pursuant to the Merger Agreement, as described in the succeeding paragraph.

The Merger Consideration and any cash paid in connection with any dividends or other distributions to which a Vivint Solar stockholder is entitled as a result of the receipt of SunEdison common stock upon conversion of any shares of Vivint Solar common stock will constitute full satisfaction of all rights pertaining to such shares of Vivint Solar common stock.

No dividends or other distributions declared or made with respect to SunEdison common stock with a record date after the Effective Time will be paid to the holder of any unsurrendered shares of Vivint Solar common

 

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stock with respect to shares of SunEdison common stock deliverable upon surrender of shares of Vivint Solar common stock until the surrender of such shares of Vivint Solar common stock. Following surrender of any such shares of Vivint Solar common stock by 313, there will be paid to 313, without interest, (i) promptly, the amount of dividends or other distributions with a record date after the Effective Time and theretofore paid with respect to such whole shares of SunEdison common stock and (ii) at the appropriate payment date, the amount of dividends or other distributions, with a record date after the Effective Time but prior to surrender and a payment date occurring after surrender, payable with respect to such whole shares of SunEdison common stock.

Appraisal Rights. In accordance with Section 262 of the DGCL, holders of Vivint Solar common stock are entitled to appraisal rights in connection with the Merger. See the section entitled “The Merger—Appraisal Rights of Dissenting Vivint Solar Stockholders” beginning on page 115 and Annex N, containing a copy of Section 262 of the DGCL, beginning on page N-1 of this proxy statement.

Vivint Solar Stock Options and Other Stock Awards

Vivint Solar Vested Stock Options. Subject to any written agreement between the relevant holder and Vivint Solar and/or SunEdison (including as to certain options held by certain members of Vivint Solar’s management team that will be subject to additional vesting, as described herein), the Merger Agreement provides that at the Effective Time each option to acquire shares of Vivint Solar common stock that is outstanding, vested and unexercised as of immediately prior to the Effective Time or that vests as a result of the occurrence of the Effective Time will, without any action on the part of SunEdison, Merger Sub, Vivint Solar or the holder thereof, other than Vivint Solar delivering any notices required pursuant to the terms of the applicable Vivint Solar equity plan, be converted into and become a right to receive the Option Payment consisting of an amount in cash (without interest), less any required tax withholding, equal to the product of: (i) the aggregate number of shares of Vivint Solar common stock subject to such option immediately prior to the Effective Time and (ii) an amount equal to the excess, if any, of (1) the Public Cash Consideration less (2) the exercise price per share of such option.

Vivint Solar Vested RSUs. Subject to any written agreement between the relevant holder and Vivint Solar and/or SunEdison, each outstanding RSU (or portion thereof) to be settled in shares of Vivint Solar common stock that becomes vested as a result of the consummation of the Merger will be treated as a share of Vivint Solar common stock and be converted into the right to receive the Merger Consideration.

Vivint Solar Unvested Options and RSUs. Subject to any written agreement between the relevant holder and Vivint Solar and/or SunEdison, as of the Effective Time, each option to acquire shares of Vivint Solar common stock that is outstanding and unexercised immediately prior to the Effective Time (other than a vested option) will be assumed by SunEdison in the Merger and converted into an option to purchase SunEdison common stock. All RSUs of Vivint Solar that are outstanding as of immediately prior to the Merger (but excluding any RSUs of Vivint Solar (or portion thereof) that becomes vested as a result of the consummation of the Merger) will be assumed by SunEdison and converted into a RSU of SunEdison. With respect to any such equity awards so assumed by SunEdison, such equity awards will be assumed on terms substantially in effect prior to the assumption (but taking into account any changes thereto provided for in the applicable Vivint Solar stock plan, in any award agreement or in such equity awards by reason of the Merger Agreement or the Merger), except for adjustments to the underlying number of shares and, with respect to options, the exercise price based on an equity award exchange ratio reflected in the Merger Agreement.

Each then outstanding and unvested option or RSU immediately prior to the Effective Time that is held by a non-employee director or person who shall not continue to provide services to Vivint Solar or any subsidiary on or after the Effective Time will vest in full as of immediately prior to the Effective Time and be treated as a vested option or RSU.

Each option to acquire shares of Vivint Solar common stock (i) which is an “incentive stock option” (as defined in Section 422 of the Code) shall be adjusted in accordance with the requirements of Section 424 of the Code and (ii) shall be adjusted in a manner which complies with Section 409A of the Code.

 

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Promptly following the Effective Time, but in no event more than 10 business days after the Closing Date, SunEdison shall issue to each holder of an option to acquire shares of Vivint Solar common stock or RSU to be settled in shares of Vivint Solar common stock that is converted into an option to acquire shares of SunEdison common stock or a RSU to be settled in shares of SunEdison common stock a document evidencing the foregoing assumption of such option or RSU of Vivint Solar by SunEdison.

Vivint Solar LTIP Awards. Each LTIP Award issued under an LTIP Plan (as defined in the Merger Agreement) that is outstanding immediately prior to the Effective Time will, without any action on the part of SunEdison or Vivint Solar, become fully vested as a result of the Merger and converted into the right to receive a payment calculated in accordance with the applicable LTIP Plan, and payable in accordance with the terms thereof and in accordance with any applicable award agreement.

Form S-8. As soon as practicable after the Effective Time (but in no event later than ten business days following the Effective Time), SunEdison will cause to be filed with the SEC a registration statement on Form S-8 (or any successor form), if available for use by SunEdison, relating to the shares of SunEdison common stock issuable with respect to the converted options to acquire shares of SunEdison common stock, the converted RSUs to be settled in shares of SunEdison common stock, and LTIP Awards eligible for registration on Form S-8.

Withholding Rights

SunEdison, Merger Sub, the surviving corporation and the Exchange Agent will be entitled to deduct and withhold from amounts otherwise payable under the Merger Agreement any amounts that they are required to deduct and withhold with respect to such payments under the Code or any other provision of applicable federal, state, local or foreign tax law. Any amounts so deducted and withheld will be timely paid to the appropriate governmental entity and treated for all purposes of the Merger Agreement as having been paid to the person in respect of which such deduction and withholding was made.

Representations and Warranties

The Merger Agreement contains representations and warranties made by SunEdison and Merger Sub to Vivint Solar and by Vivint Solar to SunEdison and Merger Sub. The assertions embodied in those representations and warranties are qualified by information in (i) the forms, statements, schedules, reports, and documents filed with the SEC by SunEdison or Vivint Solar, respectively, on or after January 1, 2014 and, with respect to SunEdison, prior to July 18, 2015, and with respect to Vivint Solar, prior to December 9, 2015, to the extent the qualifying nature of such disclosure with respect to a specific representation and warranty is readily apparent from the face thereof (excluding any disclosures included in any such report that are predictive or forward-looking in nature or included in any “risk factor” disclosure) and (ii) the disclosure letter delivered to Vivint Solar by SunEdison concurrently with the execution and delivery of the original Merger Agreement (the “SunEdison Disclosure Letter”) and the disclosure letters delivered to SunEdison by Vivint Solar concurrently with the execution and delivery of the original Merger Agreement and the Merger Agreement Amendment (the “Vivint Solar Disclosure Letters”). While Vivint Solar and SunEdison do not believe that either the SunEdison Disclosure Letter or the Vivint Solar Disclosure Letters contain information that securities laws require the companies to publicly disclose other than information that has already been so disclosed, the SunEdison Disclosure Letter and the Vivint Solar Disclosure Letters may contain information that modifies, qualifies, and creates exceptions to the representations and warranties set forth in the attached Merger Agreement. Accordingly, these representations and warranties should not be relied on as characterizations of the actual state of facts, since they may be modified in important respects by the underlying SunEdison Disclosure Letter and the Vivint Solar Disclosure Letters. Each of the SunEdison Disclosure Letter and the Vivint Solar Disclosure Letters contains information that in some cases has been included in that company’s general prior public disclosures and also may contain additional non-public information.

 

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The Merger Agreement contains customary and substantially reciprocal representations and warranties by each of SunEdison, Merger Sub and Vivint Solar relating to, among other things:

 

    organization and qualification;

 

    capital stock;

 

    authority to, among other things, enter into the original Merger Agreement and the Merger Agreement Amendment, to perform obligations thereunder, to consummate the transactions contemplated thereunder and pursuant to the Voting Agreement;

 

    the absence of conflicts with applicable laws, organizational documents, orders of governmental authorities and debt instruments as a result of the execution of the Merger Agreement, the performance thereunder and the consummation of the Merger and the other transactions contemplated thereby;

 

    required consents and approvals of governmental entities in connection with the transactions contemplated by the Merger Agreement;

 

    documents filed with the SEC and financial statements included in those documents;

 

    absence of certain changes or events;

 

    absence of undisclosed liabilities;

 

    employee benefits;

 

    legal proceedings;

 

    information supplied in connection with this proxy statement;

 

    material contracts;

 

    real and personal property;

 

    absence of applicable takeover laws;

 

    environmental matters;

 

    taxes;

 

    labor matters;

 

    insurance;

 

    brokers; and

 

    product warranties and recalls.

 

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Conduct of Business Pending the Merger

The Merger Agreement provides that after the date of the Merger Agreement until the Effective Time, except as otherwise expressly required by the Merger Agreement or applicable laws, or except as Vivint Solar or SunEdison, as applicable, may approve in writing (which approval may not be unreasonably withheld, conditioned or delayed), and subject to certain other agreed upon exceptions set forth in the SunEdison Disclosure Letter and the Vivint Solar Disclosure Letters: (i) the business of the parties and their respective subsidiaries will be conducted in the ordinary course of business consistent with past practice and in compliance in all material respects with all applicable laws, (ii) without limiting the generality of the foregoing, the parties and their respective subsidiaries will use their respective commercially reasonable efforts to preserve intact in all material respects their present business organizations, to maintain in effect all existing permits and to timely submit renewal applications (as applicable), to keep available the services of their key officers and employees, to maintain their assets and properties in good working order and condition (ordinary wear and tear excepted), to protect and maintain the material intellectual property that is owned by Vivint Solar or any of its subsidiaries, to use commercially reasonable efforts (unless otherwise mutually agreed to by SunEdison and Vivint Solar) to preserve its rights under any agreement with respect to any material intellectual property in-licensed to by Vivint Solar or any of its subsidiaries, and to preserve their relationships with governmental authorities, customers, suppliers, joint venture partners, lenders, landlords and other persons having significant business dealings with it and (iii) without limiting the foregoing, each of Vivint Solar or SunEdison:

 

    will not amend or propose to amend its certificate of incorporation or bylaws, and, in the case of Vivint Solar, (a) will cause its subsidiaries not to amend or propose to amend in its certificate of incorporation or bylaws (or other comparable organizational documents) and (b) will use reasonable best efforts to cause each of Vivint Solar’s joint ventures not to amend or propose to amend its certificate of incorporation or its bylaws (or other comparable organizational documents);

 

    will not, and, in the case of Vivint Solar, will not cause or permit any subsidiary to, declare, set aside or pay any dividends on or make other distributions in respect of any of its capital stock or share capital, except for the declaration and payment of dividends by a direct or indirect wholly owned subsidiary of SunEdison or Vivint Solar solely to its parent (or, in the case of Vivint Solar’s joint ventures, with respect to distributions in the ordinary course of business consistent with past practice);

 

    will not, and, in the case of Vivint Solar, will not cause or permit any subsidiary to, split (including reverse splits), combine, reclassify or take similar action with respect to, directly or indirectly, any of its capital stock or share capital or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or comprised in its share capital;

 

    will not, and will not permit any subsidiary to, adopt a plan of complete or partial liquidation or resolutions providing for or authorizing such liquidation or a dissolution, merger, consolidation, restructuring, recapitalization or other reorganization, except with respect to internal reorganizations among wholly owned subsidiaries of Vivint Solar or SunEdison, as applicable;

 

    in the case of Vivint Solar, Vivint Solar will not, and will not cause or permit any subsidiary to (and shall use reasonable best efforts to cause the Vivint Solar joint ventures not to), (A) issue, deliver, grant, sell, pledge, dispose of or encumber, or authorize the issuance, delivery, grant, sale, pledge, disposition or encumbrance of, any capital stock, voting securities or other equity interest in Vivint Solar or any of its subsidiaries or any Vivint Solar joint venture or any securities convertible into or exchangeable for any such shares, voting securities or equity interest, or any rights, warrants or options to acquire any such shares, voting securities or equity interest or any “phantom” stock, “phantom” stock rights, stock appreciation rights or stock based performance units or (B) directly or indirectly redeem, repurchase or otherwise acquire any shares of its capital stock or any option with respect thereto, other than in the case of (A) or (B) (i) issuances of Vivint Solar common stock in respect of any exercise of stock options or the vesting or settlement of awards under certain long-term incentive pool plans, RSUs or restricted stock options, in each such case that were outstanding as of the date of the Merger Agreement, (ii) transactions between Vivint Solar and a wholly owned subsidiary, (iii) in connection with the Merger in accordance with the terms of the Merger Agreement, and (iv) certain other exceptions;

 

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    in the case of Vivint Solar, subject to certain exceptions, Vivint Solar will not, and will not permit any subsidiary to, make any capital expenditures or acquire or agree to acquire (whether by merger, consolidation, purchase, acquisition of equity interests or assets or otherwise) any other person or any organization or division of any other person or any assets outside of the ordinary course of business, if (w) in the case of any acquisition or acquisitions or series of acquisitions of any person, asset or property, the expected gross expenditures and commitments pursuant to all such acquisitions (including the amount of any indebtedness assumed in connection therewith) exceeds or may exceed, in the aggregate, $1,000,000, (x) in the case of capital expenditures, such capital expenditures exceed, in the aggregate, $1,000,000 or (y) in any case, such transaction would reasonably be expected to prevent or materially delay or impede the consummation of the Merger beyond March 18, 2016;

 

    in the case of Vivint Solar, subject to certain exceptions, Vivint Solar will not, and will not permit any subsidiary to, sell, lease, license, assign, transfer, grant any security interest in or other Lien on, fail to maintain or otherwise dispose of or encumber (A) any of its assets or properties if the aggregate value of all such dispositions exceeds, in the aggregate, $500,000 or (B) any material Company Intellectual Property or Company Systems;

 

    in the case of Vivint Solar, Vivint Solar will not, and will not permit any subsidiary to, incur, assume or otherwise become liable for, or guarantee any indebtedness for borrowed money or enter into any “keep well” or other agreement to maintain any financial condition of another person or enter into any arrangement having the economic effect of any of the foregoing, except for:

 

    short-term indebtedness incurred in the ordinary course of business;

 

    the entry into capital leases relating to vehicles, office equipment, forklifts and other equipment in the ordinary course of business;

 

    indebtedness incurred in connection with the refunding or refinancing of existing indebtedness (x) at maturity or upon final mandatory redemption (without the need for the occurrence of any special event) or (y) at a lower cost of funds;

 

    guarantees or other credit support issued or marketing positions established prior to the date of the Merger Agreement; or

 

    additional guarantees or other credit support issued or marketing activities in the ordinary course of business;

 

    in the case of Vivint Solar, Vivint Solar will not, and will not permit any subsidiary to, make any loans or advances to any other person, other than (A) in the ordinary course of business consistent with past practice or (B) to any direct or indirect wholly owned subsidiary of Vivint Solar, or, in the case of a subsidiary of Vivint Solar, to Vivint Solar;

 

    in the case of Vivint Solar, Vivint Solar will not, and will not permit any subsidiary to, grant or incur any lien, that is material to Vivint Solar and its subsidiaries, subject to certain exceptions;

 

    in the case of Vivint Solar, except as required by law, or any Vivint Solar employee benefit plan listed in the Vivint Solar Disclosure Letters, or as disclosed in the Vivint Solar Disclosure Letters or as otherwise expressly permitted by the Merger Agreement, and subject to certain exceptions, Vivint Solar will not, and will not permit any subsidiary to:

 

    enter into, create, adopt, amend or terminate, or permit any subsidiary to enter into, create, adopt, amend or terminate, any Vivint Solar employee benefit plan, or other agreement, arrangement, plan or policy between Vivint Solar or one of its subsidiaries and one or more of its directors or officers (other than any amendment that is immaterial or administrative in nature);

 

   

except for normal increases for non-executives in the ordinary course of business consistent with past practice (which, with respect to annual on-target compensation, shall not exceed 10% of each such non-executive’s annual on-target compensation as of the date hereof), increase or permit any subsidiary to increase in any manner the annual on-target compensation or benefits of any

 

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director, executive officer or other employee (other than with respect to non-officer employees, spot bonus payments payable to employees of Vivint Solar or any subsidiary not to exceed $1,000,000 in the aggregate); or

 

    except for normal salary and wage payments in the ordinary course of business consistent with past practice, pay any benefit or vest or accelerate the funding of any payment or benefit, or permit any subsidiary to pay any benefit or vest or accelerate the funding of any payment or benefit, not required by any plan or arrangement in effect as of the date of the Merger Agreement and disclosed to SunEdison; provided, however, that the foregoing shall not restrict Vivint Solar or its subsidiaries from entering into or making available to newly hired employees or to employees in the context of promotions based on job performance or workplace requirements in the ordinary course of business consistent with past practice, agreements, benefits and compensation arrangements (including non-equity incentive grants) that have, consistent with past practice, been made available to newly hired or promoted officers and employees, subject to certain requirements;

 

    in the case of Vivint Solar, Vivint Solar will not, and will not permit any subsidiary to, redeem, repurchase, prepay (other than prepayments of revolving loans in the ordinary course of business) or modify in any material respect the terms of any indebtedness for borrowed money or issue or sell any debt securities or calls, options, warrants or other rights to acquire any debt securities (directly, contingently or otherwise), except for any indebtedness for borrowed money among Vivint Solar and its wholly owned subsidiaries or among wholly owned subsidiaries of Vivint Solar;

 

    will not, and will not permit any subsidiary to, make any changes in its accounting methods materially affecting the reported consolidated assets, liabilities or results of operations of SunEdison or Vivint Solar, respe